KOLKATA: For the first time, steel exports from India have crossed the million tonnes (mt) mark in three months, with domestic producers taking full advantage of rupeedepreciation against the US dollar to beat slowing demand at home. This could turn India into a net exporter of steel this year, reversing its status as net importer in last few years.
This comes even as producers are crying foul over rising imports due to free trade agreements and the recent government decision to exempt steel imports for specific end use from quality control norms.
"With the rupee depreciation, steel exports have crossed one million tonnes in the last few months. This has never happened before," said SAIL chairman CS Verma. SAIL hopes to almost double exports to 7 lakh tonnes (lt) in 2013-14 up from 3.7 lt in 2012-13. Exports touched 1.1 million tonnes in the first quarter ending June of 2013-14.
First time, it has crossed one million mark in Q1. Last year, it was 0.9 mt in the first quarter ending June. With weak demand at home, steel producers feel this could be an ideal stepping stone to raise share of exports, which have remained stagnant since 2003-04. "Its time the government stepped in to boost steel exports to contain current account deficit (CAD).
As a part of boosting exports, the government should bring in WTO compliant zero rate export taxes such as central sales tax on inputs, royalty incidence on inputs and electricity duties. These moves are followed by a number of countries," H Shivramkrishnan, Chief Commercial Officer, Special Projects, Essar Steel said. "The government can also extend sops given to EoUs to domestic tariff area, where most steel companies are located," he added.
The move by domestic producers could find a friendly ear in the government, with commerce ministry mandarins focused on finding ways to boost long-term exports and improve CAD. "India's steel industry can easily increase exports by 4 mt. This can bring in an additional $3 billion in forex earnings," an official from Essar Steel said.
"Steelmakers are looking at foreign markets due to a slowdown in domestic demand. Hence, exports are on the rise compared to last year. In Q1, demand grew by only 0.3%. The rise in imports and recent move to allow foreign made steel without quality checks is a worrying factor," Seshagiri Rao, joint MD and group CFO, JSW SteelBSE 0.06 % said. The company said it does not share data on its export volumes.
Analysts feel with new capacity like SAIL's new 2.8mt blast furnace at Rourkela being added, exports are likely to rise further. "A weak domestic steel market and new capacities being added is forcing steel producers to sell more abroad," said Giriraj Daga, analyst at Nirmal Bang Securities. Jindal Steel & Power Ltd (JSPL) is also finding the same geographies attractive for exports.
"We want to increase exports from 10-12 % of production to 15% of our increased production base in 2013-14. We see huge opportunities for export, particularly in MENA countries (Middle East & North Africa)," a JSPL spokesperson said.
India's steel exports have been flat despite an incremental growth of 50 mt in capacity in last 7-8 years. In 2004-05, when India produced 45 mt of steel, our exports were at 4.5 mt. However in 2012-13, even as capacity went up to 90 mt, exports hobbled at around 4.7 mt. "This can easily be raised to 7-8 mt, in step with global standards of earmarking 10% of production for exports," Shivramkrishnan said.