The government's thrust on infrastructure may bring cheer as it would increase overall metals demand.
KOLKATA: The Indian steel industry's performance this year is regarded as one the best when pitted against global peers. While global steel production grew by a mere 0.9% in the first 11 months of 2012 and Chinese production rose by 2.9%, the Indian steel industry posted an impressive 4.2% growth.
The demand story has not been that encouraging though: steel demand in India grew by 5.25% during the first 11 months of '12 at 66.72 million, which was lower than Fitch's estimate of 6-7%.
But what's worrying steel makers is the surge in imports, especially from countries like Japan and Korea with whom India has signed a Free Trade Agreement (FTA), and have even requested the government to keep steel out of the FTA product ambit.
"Local finished steel prices are under pressure due to low-cost steel imports and Indian companies may be forced to rethink their strategy regarding capacity additions in the wake of cheap imports. So, it's imperative for the government to support the local steel industry by increasing import duties on steel," said Venkatesan Subramanian, global leader, metals & minerals practice, Frost & Sullivan.
India imported around 5 million tonnes of steel, including 2 mt of Chinese consignments during April-November of 2012. In its pre-budget memorandum, industry body Ficci had said "there has been a 300% increase in import of steel in just one year from Japan & Korea".
It recommended "removal of steel products from the ambit of FTA with Japan & Korea in view of discriminatory treatment which has severely affected the domestic industry". Ficci has also suggested a rise in basic customs duty to 15% from 5% in stainless steel flat products, given the surge in imports over the past 3 years.
Import duties on steel were raised to 7.5% from 5% in 2012. On January 4, 2013, the government had imposed import duty on hot rolled (HR) products for 200 days and followed it up five days later by imposing a 20% safeguard duty on stainless steel.
While biggies like Tata Steel BSE -2.16 %, SAIL BSE -1.77 % and JSW Steel BSE -2.40 % are unlikely to benefit from this move, a clutch of other steel players can gain from it. Also, export duty on all varieties of iron ore (except pellets) had been increased to 30% from 20% ad valorem w.e.f December 30, 2012.
