India's steel sector is struggling for nearly a year now thanks to dwindling demand from major global players and consumers, including China, on the back waning growth prospects in the world. Couple this with excessive capacity from China, which has lead to dumping of cheap imports into India, along with cheap imports from South Korea and Japan too. In the domestic market, production has been contracting for some time.
While the government has already taken a few steps to support the steel sector, including imposing the Minimum Import Price (MIP) on steel products, and imposing it on 173 such products, an India Ratings' report has said that the steel industry is expected to continue facing headwinds in FY17. Saying that, the ratings' agency has maintained a negative outlook on the steel sector.
However, it also says that steel consumption demand is likely to grow to 6.3 - 6.5% in FY17, as key sectors like construction, capital goods, and consumer durables are likely to get a boost from government programs like Housing for All, Smart Cities, National Infrastructure Investment Fund, and so on. The current demand estimate for FY16 is 5.5 - 6%, the report says.
In the view of this, Dr Arun Singh, Senior Economist from Dun & Bradstreet has put noted what the industry expects from the government in the upcoming budget to give the industry a much-needed push:
-- Higher import duty on steel products, particularly long and flat steel products, which make up for some of the largest imported steel products in India.
-- Reduction in import duty on iron ore imports: Iron ore production in India declined from 218 million tonnes in FY10 to 125 million tonnes in FY15. The shortfall is normally met through imports. The industry expects that the government will slash the import duty on ore imports, which will help in reducing the cost of production.
-- Reduction in import duty on coking coal: Coking coal is a key input in steel manufacturing and in the absence of domestic resources, steel manufacturers resort to imports for their coking coal needs. A reduction in the import duty is expected which will help to control the input costs.
Source: DNA INDIA. Com