The government has already met some of the demands of the steel industry. It has raised the customs duties on long and flat in carbon steel in two stages in the past few months, from 5% to 7.5% and then to 10% in long and from 7.5% to 10% and then to 12.5% in flat, while keeping the option of raising the duties up to 15% mandated by the last year’s Budget. To reduce the burden of increasing costs of raw materials for making steel, the customs duties on scrap (MS and SS) was reduced from 5% to 2.5% in the last Budget.
In the post Budget phase, the continuous decline in prices of iron ore, coal (both thermal and coking) and scrap did not allow the steel industry to derive any benefits of lower production costs as finished product prices also came down sharply. Global recessionary trend in commodity markets led to steep fall in demand and prices and this made the existing capacities in steel appear menacingly surplus.
The major exporting countries — China, Russia, Ukraine, Turkey, Japan, South Korea and Brazil — had aggressively resorted to exports at cheap prices almost at unsustainable levels. The prices offered by China were below their production costs. Steel industry in China has been the beneficiary of a number of subsidies from the government in terms of low interest on bank loans, low costs of raw materials, high export incentives, etc. In the process China faced a number of antidumping and countervailing investigations culminating in imposition of heavy duties against Chinese exports by the US, Mexico, EU, India, Indonesia, Turkey, Vietnam and Brazil for all types of steel in various categories.
Stainless steel consumption in the country is no longer confined to utensil segment and has widened its coverage to industry applications particularly in ABC (architecture, building and construction) over the past few years. Use of SS grade steel is increasing in high value niche segments like nuclear power, airspace, etc. Substantial capacity expansion has been planned by domestic players in North, East and South regions. The subdued demand scenario in both domestic and international markets and steep decline in prices of finished steel by more than 30% in the past few months are causing much pain to the industry.
During the first 10 months of the current fiscal, the production of SS in India has only grown by less than 3%, but the imports exhibited substantial rise of more than 17%. This has resulted in lowering the indigenous capacity utilisation at less than 50% and has made the investments already made for capacity augmentation by the major domestic players like SAIL and Jindal rather uncertain and unviable. The import of SS flats has gone up from 0.32 million tonne in FY14 to 0.46 million tonne in FY15 and has reached 0.39 million tonne (JPC) during April-Jan ’16. China continues to remain the top exporter of cheap SS steel to India having a share of more than 50% of imports of SS flats.
On the basis of an antidumping petition filed by the domestic SS industry, the government carried out the investigation and antidumping duty was imposed in 2015 on cold rolled flat products of imported SS in width of 600-1250mm from Korea, China, EU, Taiwan, South Africa, the US and Thailand. However, it is seen and duly acknowledged by the Director General of Antidumping in its final findings in October ’15 that large scale circumvention of duty is taking place as higher width (>1250 mm) SS steel is easily imported in substantial tonnages by slitting the same into narrower width at nominal costs, thereby making the duty ineffective. The industry has already filed anti-circumvention petition (on width>1250mm) before the government.
In order to give a timely relief to the beleaguered SS industry and to take care of the circumvention, the government must enhance the basic customs duty on SS Flats from the current 7.5% to 15% in the Budget. At least the duty benefits given to carbon steel flat categories (12.5%) may be extended to SS grades. It may be mentioned that Brazil has 14% duty on SS Flats, while China, Thailand, Indonesia and Vietnam have imposed 10% duty.
Also in the interest of level playing field with China and other countries, the import duty on ferro nickel, pure nickel and scrap (both MS and SS) may be reduced to nil from the existing level of 2.5%.
source: http://www.financialexpress.com