- The duty imposed is in the range of $13.07 per tonne to $173.1 per tonne.
- According to global trade norms, a country is allowed to impose tariffs on such dumped products to provide a level-playing field to domestic manufacturers.
The Indian government imposed anti-dumping duty on imports of flat-rolled products of steel, plated or coated with an alloy of Aluminium and Zinc from China, Vietnam, South Korea for five years to protect the domestic manufacturers from cheap imports. The duty imposed is in the range of $13.07 per tonne to $173.1 per tonne.
The Commerce Ministry’s investigation arm Directorate General of Trade Remedies (DGTR) initiated a probe against certain kinds of aluminum foil imported from China, Indonesia, Malaysia, and Thailand after getting complaints from Hindalco Industries, Raviraj Foils, and Jindal India Ltd.
It was found that the products imported from these countries are below the associated value and were dumped, hurting the domestic industry.
In international trade, dumping happens when a country or a firm exports an item at a lower price than the price of that product in the importing country’s domestic market, hitting margins and profits of its manufacturing firms. The demand for imposing import duties had been long pending.
According to global trade norms, a country is allowed to impose tariffs on such dumped products to provide a level-playing field to domestic manufacturers. The imposition of anti-dumping duty is permissible under the WTO regime.
Earlier, the government had extended anti-dumping duty on a certain variety of steel products till December 4 2019 to safeguard domestic manufacturers from cheap imports coming from China, Malaysia, and Korea.
Pankaj Satija, Chief Regulatory Affairs, Tata Steel told The Blue Circle that at this point of time, the indian steel industry needs protection from the threat of cheaper imports to ensure fair trade practices and level playing field.
Indian Steel Industry
India surpassed Japan to become the world’s second-largest steel producer in 2019, with crude steel production of 111.2 million tonnes.
The Indian steel industry is very modern with state-of-the-art steel mills. It has always strived for continuous modernisation and up-gradation of older plants and higher energy efficiency levels.
India’s finished steel consumption grew at a CAGR of 7.5% during FY18-FY19 to reach 97.54 MT. India’s crude steel and finished steel production increased to 106.56 MT and 131.57 MT in 2018-19, respectively. In FY20 (till February 2020), crude steel and finished steel production stood at 100.78 MT and 94.01 MT respectively, according to data from IBEF.
During 2018-19, 6.36 MT of steel was exported from India. Exports and imports of finished steel stood at 7.78 MT and 6.39 MT, respectively, in FY20P (up to February 2020).
Source: India Brand Equity Foundation
To improve efficiency and give a boost to the sector, the government introduced the Steel Scrap Recycling Policy to reduce imports. It has levied an export duty of 30% on iron ore (lumps and fines) to ensure supply to the domestic steel industry.
Government of India’s focus on infrastructure and restarting road projects is aiding the boost in demand for steel. Also, acceleration in the rural economy and infrastructure is expected to lead to growth in demand for steel. The Union Cabinet, Government of India has approved the National Steel Policy (NSP) 2017, aimed at creating a globally competitive steel industry in India.
NSP 2017 forecasts 300 million tonnes (MT) steel-making capacity and 160 kgs per capita steel consumption by 2030-31. The Government of India raised import duty on most steel items twice, each time by 2.5% and imposed measures including anti-dumping and safeguard duties on iron and steel items.
The per capita consumption of steel has increased from 57.6 kg to 74.1 kg during the last five years.
Headwinds and Tailwinds
COVID has adversely impacted the steel industry with slumped domestic demand and a severe liquidity crisis. The construction and the automotive industry, the two biggest end use applications for the steel sector have faced the greatest negative impacts on their operations.
The construction sector is in doldrums due to factors such as withered demand, migrant labour crisis and stressed balance sheets; while the automobile sector is facing a demand catastrophe due to drop in discretionary spending & shutdown of showrooms and service centres that have resulted in zero sales in April. This is in addition to the cyclical slowdown that has plagued the automotive sector for at least the past couple of quarters.
However, infusion of funds by the government in direct benefit transfer schemes & rural livelihood schemes along with the promise of a good monsoon season have the potential of increasing steel demand in the rural areas. The steel sector is also making efforts to make the most of this crisis by increasing exports in the surrounding regions.
In the coming months, a boost in government expenditure can give an impetus to revival in the infrastructure sector, which has a direct correlation with steel sales and consumption. However, a contracted global demand and delay in the flattening of the COVID curve can prolong the economic slowdown and lead to increased insolvencies in the already fragile steel sector.
“As the economy slowly recovers, investment in infrastructure projects and improvements in auto and real estate sectors will boost steel demand,” said Satija.
The China Connection
In April and May this year, when the country was focussed on containing the spread of the virus, China emerged as the most important export destination for the Indian steel industry, accounting for about 48 % of total steel exports.
In the first two months of the current fiscal, Indian exports of finished steel grew by almost 76% year-on-year where China alone accounted for close to 60% of the increase. As domestic demand in India crashed, primary and secondary steel producers in the public sector and private sector shifted to exports.
However, such an increase in exports may be a temporary phenomenon, China which accounts for ~50% of the world production and has huge excess steel capacities poses an ever looming threat to the indigenous steel players.
(Edited by Anu Choudary)
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