Domestic steel manufacturers are perturbed by the steep rise in steel imports over the past few months from countries such as China, Brazil, Korea, Germany and Spain, which according to them is a potent threat to the domestic steel market. A surge in import of low-priced steel from these countries has forced domestic manufacturers to urge the Government of India (GoI) to impose safeguard duty. The 5-month period from April-August in the current financial year witnessed a surge in cumulative steel imports. The import of hot-rolled and cold-rolled sheets jumped to 2.58 million tonnes (mt), as against 1.7 mt during the corresponding period last year, which is almost a 50% rise.

Domestic steel manufacturers concerned

“The intent of these countries to make India a dumping ground for cheap steel is a matter of great concern. Adequate government intervention is required to safeguard the interests of domestic steel manufacturers. We are in favour of fair competition, but dumping efforts by these countries will adversely affect the domestic industry in the long run,” says Abhishek Shah, proprietor of Krystal Steel Manufacturing, a mid-sized steel manufacturer in Mumbai. The steel prices in India stands approximately at US$650 per tonne, whereas steel imported from the aforementioned countries costs around US$540 per tonne, thereby luring companies to import cheap steel.

In this context, Balabhai Patel, proprietor of Aalindra Steel Manufacturers, a mid-sized steel manufacturer in Rajkot, Gujarat, says, “These countries are also offering heavy discounts to dump their products in the Indian markets. Considering the rising demand for steel in various sectors such as automobiles, consumer durables and real estate, among others India has become a lucrative destination for them. With aggressive pricing from these countries, domestic prices are under severe pressure.”

Demand for increase in import duty on steel

Robust demand for steel in India has made it an attractive destination for most of these exporting countries, where steel consumption is much less as compared to India. Owing to demand slump in these countries, the steel manufacturers are forced to run their units much below the viable capacity utilisation, thereby forcing them to look for markets like India where demand for steel is pretty high.

Domestic steel manufacturers had urged GoI to increase the import duty on steel from the current 5% to 15-20% in Union Budget in order to safeguard their interests. However, a government panel in May 2009 had rejected their plea by stating that it is unjustified as it had already levied an import duty of 5% on most steel products.

The import duty was levied for the first time in November 2008 on steel products imported from China and Ukraine. This is much less as compared to import duty levied by other countries to safeguard the interests of their domestic steel market. For example, rate of import duty on hot-rolled steel in Thailand hovers around 16-27%, whereas in Malaysia it is 10%. The rate of import duty on steel in Indonesia is around 12-25%.

Although domestic steel manufacturers have appealed to GoI for imposition of safeguard duty at the earliest, there is still no proposal in the Ministry of Steel to impose a ban on steel imports.

Arup Choudhury