The government appears convinced that the steel industry needs more protection. Safeguard duties on certain varieties of flat steel have already been imposed and more are in the pipeline. Reports of a floor price for imports are also doing the rounds. The impression conveyed is that the steel industry is sinking because of imports. But the numbers convey a somewhat different picture.
In April-September, finished steel imports had risen by 41%. That is high. The increase in September, however, was quite modest at 1.7%. The government had imposed quality certification requirements earlier in the fiscal. That could be a reason.
Weak demand was definitely not a cause. Consumption rose by 5% in September and has stepped up even further since then. Consumption growth shifted up to 6.6% in October and then even higher at 11.2% in November. Steel demand is flying high; that’s good news.
So, what if consumption is high, the menace of imports continues, right? Not quite. After September, the effect of the anti-dumping duty on hot rolled steel may have kicked in. October saw imports rise 34% but November’s numbers declined by 6.9%. Rising consumption and slowing/declining imports don’t match up.
So, what if demand is picking up and imports are slowing, output should be growing, too? In September, output declined 0.8%, October saw a 1.3% rise while it declined by 3.5% in November. The main reason is the declining production of mini and other steel producers, who contributed to 57% of finished steel output. Smaller firms appear to be cutting output as prices have declined.
Source: http://www.livemint.com/