The safeguard duty imposed by the Indian government on hot rolled coils a month back has failed to stem imports as international prices have fallen further amid high inventory levels.

Total steel imports in the first half through September rose 42% to 5.93 million tonnes. Imports from Japan and Korea were up 80% and 77% respectively. China accounted for 1.59 million tonne of imports and altogether imports from China, Japan and Korea stood at 4.28 million tonne.

Imports of hot rolled products rose 83% to 2.91 million tonne from 1.59 tonne. Here again, China, Japan and Korea together accounted for 2.25 million tonne of imports, up 88%.

Imports from Japan were up 135% and Korea by 220%.

Inventory levels were also higher than March-end.

"Following the imposition of the duty, the differential between domestic and international hot rolled coil (HRC) prices had reduced significantly and the domestic prices were largely aligned with imported steel prices. However, international HRC prices have declined further by around 5% after the duty was imposed which along with weak domestic demand conditions and prospects of further capacity addition in India in the near term were likely to keep domestic prices under check," ICRA said in its recent report.

Does it mean that the safeguard duty has failed?

JSW director-commercial & marketing, Jayant Acharya, says that the duty was absolutely necessary or the situation would be far worse.

"Supply will get limited. The problem is, China has again reduced prices and so have Japan and Korea. So there is a neutralisation impact," he explained.

"September imports are in line with August but typically there is a lag in impact," a steel producer pointed out.

But the industry has now come up with the demand of extending the safeguard duty to the entire value chain. "If it doesn't happen the next target will be cold rolled products. Imports of colour coated products have already gone up significantly," Acharya said.

The government has also taken steps on the infrastructure side, which could help boost demand. Acharya says that the demand push from the government's measures in highways, roadways, power transmission lines, solar would only be visible next year.

The ICRA report said that while the growth remained steady at upwards of 6% during the first three months, it declined to 0.5% in July 2015, indicating that demand scenario was still uncertain.

Domestic steel production growth declined to 1.3% during the period April-July 2015 from 3.3% registered in FY15.

That said, India is one of the few countries that is growing. World Steel Association recently said: "Steel demand in India and Mexico and other countries in the ASEAN and MENA regions is expected to maintain growth momentum despite the adverse external environment due to positive domestic demand and progress in reform."

 

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