Indian Government hikes import duty on steel imports from China and South East Asia
18 June 2015
In a decisive step, the government has hiked import duties on steel meeting a long standing demand from domestic players reeling under a flood of cheaper steel imports from China and South East Asia. The decision, which comes on top of recent imposition of anti-dumping duty on some grades of stainless steel, brought much-needed cheer to steel stocks. While industry appreciated the step and remained disappointed with the quantum of the hike, analysts tracking metal stocks remained indifferent to the move calling it "too little too late."
Duty on flat products of steel like hot and cold rolled (HR/CR) sheets and coils typically used in automobiles, refrigerators and washing machines were revised upwards from 7.5% to 10%. On long products of steel like TMT bars, angles and channels, used in building and construction, duty has been raised from 5% to 7.5%. The two exceptions were duty has been maintained at existing levels are -CRGO (cold rolled grain oriented) steel or "electrical steels" that few domestic players manufacture and stainless steel flat products. Steel stocks jumped in reaction to the move, anticipating its impact of steel companies' financials.
At 2 pm on Wednesday, JSW Steel stock had jumped 4.13% to Rs 874 on the BSE before closing at Rs 867.05 up 3.3%, Tata Steel scrip had surged 4.94% to Rs 309 and closed at Rs 305.10 up 3.62% over the previous close. The SAIL scrip had gained 4.08% to move up to Rs 62.50 around 2 pm, it ended the day at Rs 61.15 up 1.83% over its previous close, while JSPL stock went up 3.31% to Rs 98.35 on the exchange before closing 0.89% over previous close at Rs 96.05.
"The move will benefit India steel makers from the pressure of imports," union steel & mines minister Narendra Singh Tomar tweeted on the micro-blogging site. "Combined with a recent anti dumping duty on stainless steel, it is also a sign of our commitment to Make in India," the minister commented on Twitter.
Indian Steel Alliance (ISA), an industry body of private and public steel producers like JSW Steel, Tata Steel, SAIL and JSPL lobbying for a duty hike, said it welcomed the move. "It is a welcome step since it relieves some of the pressure on steelmakers though we wanted a bigger hike in duty. However, it shows the government has recognized that imports pose a serious challenge to steel industry," Sanak Mishra, secretary general of ISA, an industry grouping of top public and private steel producers. "We have to continue our dialogue with the government on ways to sustain domestic steel industry," Mishra added.
H Shivramkrishnan, chief commercial officer of Essar Steel: "It is a step in the right direction. However, additional tariff and non tariff measures are required to ensure cheap and unfair imports do not damage domestic steel industry which has invested significant capital and has long terms plans of meeting the Make in India vision."
Analysts termed the move as "too little, too late." "The move does not address the basic problem of low underlying steel demand. The quantum of the hike is too less to have any meaningful impact. It may arrest the steady slide in domestic prices for the time being by reducing the existing 6% gap between domestic products and imports. For steel companies the relief will be temporary, since steel demand remains slack during the monsoon. It will also not improve their financials," Goutam Chakraborty, Analyst -Institutional Research, Emkay Global said.
Rakesh Valecha, senior director India Ratings & Research said: "The impact of the import duty hike on overall steel sector is expected to be moderately positive in the long run; however any near term benefit is less likely given the bleak consumer spending and falling steel demand. Given price discount on imported steel, the impact is likely to be minimal on imports."
ISA intensified its efforts in the wake of a 71% jump in imports between April'14 and March '15 to nine million tonne (mt) with China accounting for 2.9 mt or 33% of it. Imports,which have been clocking almost 1 mt per month since September 2014, remained unabated , going up 43% in April and 85% in May 2015. Against this, Chinese imports had amounted to 1.08 mt in 2013-14 when total steel imports touched 5.45 mt. Earlier this month, ISA members, including top steel honchos like JSW Steel chief Sajjan Jindal, Tata Steel MD TV Narendran, the- then SAIL chairman C S Verma, Essar Steel chairman Shashi Ruia ,Jindal Steel and Power Limited's Naveen Jindal met finance minister Arun Jaitley to apprise him of the threat posed by rising steel imports. Steel minister Tomar also attended the meeting.