India

A war over steel imports has broken out yet again between the world’s two largest producer nations: China & India.

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The Steel Authority of India Ltd. and JSW Steel & Essar Steel India filed a complaint with India’s Directorate General of Anti-Dumping and Allied Duties, seeking an anti-dumping investigation as well as the imposition of tariffs on steel imports from six countries. Soon thereafter, the DGAD said it had prima facie evidence of dumping of steel originating from China, Japan, Russia, Korea, Brazil  and Indonesia.

Chinese Production vs. Indian Production

China is the world’s biggest steel producer, accounting for around 822 million tons a year. Driven largely by a fast track economy in the past quarter century, China’s steel output has grown by more than 12 times it’s size in the ’80s. By comparison, the EU’s output fell by 12% while U.S. output has remained flat. Of late, China has found itself in the midst of dumping controversies involving many countries it sends exports to, including the U.S., the European Union and Australia.

Steel mills Molten iron smelting furnace production line

Chinese steel production is the target of India’s anti-dumping probe. Source: Adobe Stock/zjk.

The Indian probe’s purpose is to establish the “existence, degree and effect of dumping” by the six nations. If found to be true, it will then recommend a minimum amount of anti-dumping duties. The probe covers hot-rolled flat products of alloy or non-alloy steel in coils, as well as hot-rolled flat products of alloy or non-alloy steel not in coils. Most of these products are used in the the automotive, oil and gas line pipes/exploration, cold-rolling, pipe and tube manufacturing industries.

Trade between China and India has been growing but individually, the two are polar opposites so far as global exports are concerned. India’s exports account for just 1.7% of world trade, compared with nearly 12% for China’s. China exported 112 million metric tons of steel in 2015, which was 25% more than India’s total production of steel. India produced 92 mmt of steel in its 2014-15 fiscal year, while it imported over 9.32 mmt of steel, of which, an estimated 30% came from China.

Meanwhile, on the other side of the globe in Belgium, international steel producing countries, too, called for urgent action to curb overproduction.

A joint statement from the U.S., Canada, the E.U., Japan, Mexico, South Korea, Switzerland and Turkey, called calls for “ongoing international dialogue” to remove “market-distorting policies.”

But China rejected suggestions that it subsidized its loss-making steel companies.

India has often used anti-dumping duties and also imposed safeguard duties due to such import surges.

A few days ago, the Indian government extended the safeguard duty on steel imports until March 2018, after having first imposed them in September 2015. There will be no safeguard duties on steel imported at or above the minimum import price (MIP) stipulated by the government.

Anti-Dumping or Countervailing Duties?

Both, anti-dumping and countervailing duties try to rectify the same issue: low-priced imports. But the difference between the two is the real cause of the low price.

Anti-dumping duties are used to tackle “dumping,” a legal definition for imports whose price is lower than their production cost. An exporter sets steel prices lower than production costs and floods other markets with such steel products. If a Chinese producer spends $120 per mt to make cold-rolled steel, and then sells it in the Indian market for $90 mt, while his Indian counterparts are selling their produce for $110, then these imports are based on a predatory pricing model that is either indirectly subsidized in the originating country, or takes advantage of a lower-valued currency and production costs back home.

On the other hand, countervailing duties seek to counter low prices that are an outcome of direct subsidies. The Chinese government, like some others, offers subsidies on exports in the form of tax breaks. As a result, exporters can offer lower prices than domestic producers. Countervailing duties level the playing field by negating the advantage of direct government sponsorship by increasing import tariffs to level the playing field.

Such duties are allowed by the World Trade Organization under the General Agreement on Trade and Tariffs (GATT) but only if dumping is established. Anti-dumping duties have to be removed if the margin between the domestic price and imported price goes below 2%, or when the imports of product from a country account for less than 3% of total imports of the product.

Also, the WTO says safeguard and anti-dumping duties cannot be country specific. So, if India or the U.S. imposes duties on imports from China, the latter can also impose duties on imports from those two nations.

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This is what China is now pointing out to India. A few days ago, the world’s top steel maker asked India not to resort to “trade protection measures” and to “strictly follow” WTO rules while investigating cases of dumping by Chinese iron and steel exporters. Steel overcapacity is a worldwide problem which requires a joint effort from all countries, an unnamed Chinese official was quoted as saying by the official Xinhua news agency.

The size of the U.S.contingent at India’s DefExpo 2016, held recently in the state of Goa, was enough to send out a clear message.

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Of the 47 participating countries, the U.S. was among the event’s largest international exhibitors, clearly underlining the importance of the region to the American defense and security business. This was the first time that DefExpo, India’s most prominent defense and security trade event, was held outside the capital, New Delhi.

Who Makes What? Or Asks For it?

The event saw a bit of “Make in India” mingling with “Ask America First.” The U.S. International Pavilion saw potential buyers looking for ways to meet a critical mass of U.S. suppliers, and an onsite business hub for American exhibitors looking to maximize their exposure and impact at the event.

Polaris_Dagor_550_041516

The Polaris DAGOR was designed for U.S. SOCOM (Special Operations Command) and U.S. Special Operations Forces. Source: Polaris. 

“When U.S. companies commit to exhibit at DefExpo, they’re saying they believe in the power of this event to attract real business prospects and customers. The global interest in this show speaks for itself,” said Kallman Worldwide President and CEO Tom Kallman, in a media release. Kallman Worldwide, Inc., was the designated U.S. Representative of the show, in coordination with numerous U.S. government agencies

“The United States is the world’s biggest aerospace and defense supplier, but that’s no guarantee that buyers will look to work with American companies over others,” Kallman said. We want every visitor to ‘Ask America first’ at DefExpo, and to be assured that America is listening.”

Heavy Defense Hitters

The list of participating companies read like a veritable who’s who of the U.S. defense and aviation industry. Boeing was there, of course, along with Honeywell, Lockheed-Martin, Raytheon and Textron, along with a cross section of leading American suppliers working to strengthen or initiate international partnerships. A high-level federal government delegation, which included General Dennis L. Via, Commander of the Army Material Command; Ann Cataldo, Deputy Assistant Secretary of the Army for Defense Exports and Cooperation; and Thomas L. Vajda, the Consul General of the U.S. Consulate in Mumbai were part of the U.S. delegation.

Clearly, as voiced by the Consul General, defense and space technology is now high on the list of cooperation between the U.S. and India. And the efforts of the federal government to reach out to local Indian manufacturers such as Tata Steel and Mahindra, who of late have formed their own defense equipment producing units, should boost India’s “Make in India” campaign.

Such collaboration could be music to the ears of both Indian and American steel and other metals manufacturers since outside of infrastructure and automobile, defense is one of the largest consumers of steel and aluminum.

For example, Polaris India Pvt. Ltd., a wholly owned subsidiary of Polaris Industries Inc. a leader in off-road and all-terrain vehicles, showcased its  products, the Dagor (Deployable Advance Ground Off-Road) and the Mrzr4 at the DefExpo India 2016.

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These vehicles were brought to India for the first time. Polaris also showcased its six-wheel drive off-roader, BosSportsman Big s 6×6 and its Ranger 6×6 800 at the event.

Polaris India has developed the DAGOR vehicle under a contract from elements of the U.S. Special Operations Command (SOCOM) and international Special Operations Forces (SOF) customers.

India’s steel imports increased this week for the first time since November and Thomson Reuters warns that copper is still oversupplied and recent price increases will eventually be lost.

Indian Steel Imports

India’s steel imports increased 18% in March, snapping four straight months of falls, provisional government data showed, on the back of deals struck before the government imposed a price floor in February to curb cheap imports.

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Last week, the government extended safeguard taxes on some steel products until March 2018, and in February imposed a floor price on imports to deter countries such as China from undercutting local mills.

Copper Still Oversupplied

Copper prices are expected to slide below January’s six-and-a-half-year lows, hit by a lack of production cutbacks and weak demand in the world’s biggest metals consumer China, GFMS analysts at Thomson Reuters said.

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The benchmark copper price on the London Metal Exchange has bounced 10% since touching a low of $4,318 a metric ton on Jan. 15, but it is due to resume its downtrend, GFMS said in its Copper Survey 2016 report

Vale SA is selling its stake in a Brazilian steel plant to Thyssenkrupp and India has emerged as the biggest customer for newly unsanctioned Iran’s oil.

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India Will Buy Iranian Oil for 7 Years

India is set to import at least 400,000 barrels per day of Iranian oil in the year from April 1, with refiners looking to ramp up purchases after the sanctions targeting Tehran ended in January, Reuters said.

Vale to Sell its Stake in CSA

Brazilian miner Vale SA said on Monday it will sell its entire 26.87% stake in the struggling CSA steel plant to Germany’s ThyssenKrupp for a token value, in a bid to focus on core mining businesses with commodity prices at historic lows.

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Vale’s announcement confirmed a Reuters report on Friday which said the world’s largest iron ore producer was planning to exit the steel venture.

The London Metal Exchange is looking to make large positions more transparent and India is not applying its new steel quality standards to automotive imports. At least not yet.

LME Wants Transparent Reporting

The London Metal Exchange said on Thursday it’s seeking views from its members and other interested parties about the potential for more transparent reporting of positions above certain thresholds.

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The LME monitors all positions held on its market, what it is proposing is a measure to put the onus of reporting any large positions on members.

India Sets New Steel Quality Standards

India imposed new quality standards on steel products sold in the country Thursday, but delayed bringing auto-grade steel imported by automakers under the purview of the new order by six months.

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Indian automakers import about 1 million metric tons of high-tensile steel annually, mainly from Japan and South Korea, and had sought an extension to avoid disruption in production.

The way countries around the world, faced with downturns in their respective economies, are placing import curbs on metals or finished products, it almost seems to be a tit-for-tat battle.

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Over the last three years, the U.S., some European nations, and India, China and South Korea, on the other side of the globe, have periodically imposed or increased duties to curb cheap imports.

U.S. Ferrous Tariffs

At the start of this March, as reported by MetalMiner, the U.S. Department of Commerce announced its affirmative preliminary determinations in anti-dumping duty investigations of imports of cold-rolled steel flat products from Brazil, China, India, Japan, South Korea, Russia, and the U.K.

imports

While China received a previously unheard of preliminary dumping margin of 265.79%, based on adverse facts available, the India respondent to the investigation JSW Steel Limited/JSW Coated Products Limited got off relatively lightly and received a preliminary dumping margin of 6.78%. All other producers/exporters in India received a preliminary dumping margin of 6.78%.

Aluminum Import Duties

Apart from steel, the US aluminum industry, too, of late, has increased its efforts to address China’s overproduction capacity and the resulting glut in the global market. The “China Trade Task Force,” a cooperative effort between smelter Century Aluminum and the United Steelworkers union, have been working to slow imports of cheap Chinese product for some time, but now the industry trade group the Aluminum Association is speaking out more forcefully.

And before you could say aluminum, the Indian government, a few days ago, proposed raising the basic customs duty on the metal by 2.5% in a bid to protect local producers from cheap imports. To be fair, though, to India’s government, the proposal is part of the country’s 2016-17 union budget, so it was not a sudden, knee-jerk move, but a carefully thought out proposition in the wake of increasing demands by local producers.

Basic customs duties were proposed to be hiked on primary aluminum from 5% to 7.5%, and on aluminum products from 7.5% to 10%.

Vedanta Wonders If It’s Worth It

The aluminum lobby in India has been pressing for an increase in the face of low-priced aluminum from foreign countries making its way into the Indian market for years. Some local  producers, unable to keep up, even slipped into losses. Vedanta Resources, in August, initiated the process to shut down its 1 million metric ton per year alumina refinery in Odisha.

But Vedanta Resources CEO Anil Agarwal said the move lost meaning, since the hiked duty had been “neutralized” by doubling the tax on coal. In the same union budget, there is a promise to double the clean-energy tax on coal, which now will make the fuel costlier for metal producers, effectively wiping out the gains made by increasing the import tax.

According to industry data, total aluminum imports in India had grown by over 159% to 1,563,000 metric tons in 2015 against 881,0001 mt in 2011, mainly from China and Middle-Eastern countries. This has led to imports accounting for 56% of the Indian aluminum consumption in 2014-15, while products of Indian producers accounted for only 44%.

Interestingly, while the Indian government has taken the step to hike duties to protect local industry, some experts have argued against the move. The government’s own report India’s Economic Survey 2015-16, released before the budget, itself indicated that raising tariffs to quell imports of cheap aluminum would do harm to downstream sectors such as power, transportation and construction.

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The report said India’s aluminum industry would continue to experience tough economic times unless the global aluminum price increased. The domestic aluminum industry’s capacity utilization had dropped over the last eighteen months, matching the global aluminum price decline. As of now, India’s cost of production for aluminum was higher than the current global price for the metal, part of it attributed to market saturation by China.

It’s a problem that’s dogged almost all the major economies as well as developing nations – the dilemma of steel cheap imports. Steelmakers in the U.S. have, in the past, not only cried foul at the World Trade Organization but also imposed steep anti-dumping duties on cheap imports from China, Korea and India making their way into the U.S. market, thus further depriving an already-stressed out market.

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A few days ago, as reported by MetalMiner, seven EU nations asked the European Commission to intervene to stop cheap imports of steel, particularly from China and Russia.

India has imposed a minimum import price on most steel products. Source Adobe Stock/Jovanning.

India has imposed a minimum import price on most steel products. Source Adobe Stock/Jovanning.

In India, a market where steel consumption continues to grow bucking global trends, the situation is no different. So, finally giving in to the loud protests by domestic steel companies against cheap imports, the Indian government recently imposed a minimum import price (MIP) ranging from $341 to $752 per metric ton on 173 steel products as a “temporary” measure.

Minimum Import Prices

The MIP conditions are valid for six months from the date of the notification or until further orders, whichever is earlier. The MIP, though, will not be applicable on imports under the advance authorization scheme and high-grade pipes used for pipeline transportation systems in the petroleum and natural gas industry are exempt.

The move seems to have gone down well with a majority of the steel trade bodies and a large section of India’s steel industry, but some have called it simply a band-aid for the hemorrhaging steel sector.

India’s domestic steel production between April-January 2016 dropped 1.8 % to 75.66 million mt, while imports rose 24.1% to 9.3 mmt. Consumption grew 4.2% to 65.91 mmt. For domestic steelmakers, apart from the MIP, the import duty has also been raised to 10% for flat products and 7.5% for long products.

The rationale behind the MIP was explained by Steel Secretary Aruna Sundararajan, in an interview with The Economic Times. She said the move would give India’s steel industry much-needed breathing space to get healthy.

Emergency Measure

Over the last couple of years, India had seen a spurt in steel imports, leading to a decline in prices. According to the Steel Secretary, India had over 400 mmt of surplus steel. All that surplus has put the domestic steel industry into distress.

While imposing the MIP, the Indian government also took care to ensure that downstream users were not affected. That’s why certain categories of steel — required by end-user industries — not manufactured in India, were exempted.

The government’s decision to impose MIP will, however, reduce the benefit of lower commodity prices for automobile companies, according to many experts. Also, according to the engineering goods exporters’ body, EEPC India, the MIP will lead to further erosion in engineering exports. It has thus sought from the government a compensatory mechanism to make up for the increased raw material price (about 10%) for the distressed exporters, mostly in the small and medium-sized enterprises segments.

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The Indian government has dubbed the MIP an “emergency provision.” In the next six months, it will be looking at anti-dumping duties  and moving toward more stable, longer-term measures. It will also be keeping a close watch on imports after the MIP, as well as the response of domestic steel companies and consumers.

The Indian government recently imposed import duties, for a term of five years, on stainless steel from China, the US and the European Union. The move has evoked mixed reactions from industry and analysts.

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The anti-dumping duties are an attempt to protect local companies from “unfair competition.”

Anti-dumping duties, on cold-rolled flat stainless steel products, ranged from 4.6 to as high as 57.4%. Along with the above-named countries, imports from South Korea, South Africa, Taiwan and Thailand will also be taxed.

Will the idling of Midland by ATI take a bite out of stainless supply? Only time will tell. Source: Adobe Stock/Jovanning.

India has taken steps to protect its domestic stainless industry from cheap imports.  Source: Adobe Stock/Jovanning.

While a large section of India’s domestic steel industry welcomed the move, some experts opined that the duty did not make much sense, except, of course, for protecting local steelmakers.

In an interview with the Economic Times, N.C. Mathur, director of corporate affairs at JSL Steel and the president of the Indian Stainless Steel Development Association, said that the anti-dumping duties on cold-rolled stainless steel products were “not likely to help the domestic industry in any way.”

That was because they were imposed after the review of an earlier, similar, notification, and all the conditions remained the same in the new tariff structure.

Do These New Dumping Duties Even Matter?

According to Mathur, the duties are restricted in terms of cold-rolled width — from 600 mm to 1250 mm. The same terms and conditions were already in place under the earlier anti-dumping law, yet, importers had been easily circumventing it over the last five years.

How? They would simply import products measuring above 1,250 mm.

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Brazil’s government got more aggressive about penalizing the owners of what it says is its worst mining disaster ever and India wants to unlock the potential of its citizens hoarded gold

Samarco Disaster Lawsuit

Brazil filed a lawsuit on Monday against two of the world’s largest mining companies for 20 billion Brazilian reals (about $5 billion) to clean up what it says was its worst environmental disaster, caused by the collapse of a tailings dam at a joint venture iron ore mine the two operated.

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The governments of Brazil and those of two states hit by the damburst sued iron ore operator Samarco and its co-owners, the world’s largest miner BHP Billiton Ltd. and the biggest iron ore miner Vale SA.

India Wants Citizens To Sell it Their Gold

India is discussing changes to a scheme to unlock the country’s massive stash of gold at a high-level meeting this week, after a muted response to the program in the first month of its launch, according to banking sources.

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Prime Minister Narendra Modi launched the plan on Nov. 5 to lure an estimated 20,000 metric tons of gold hoarded in households and temples into the banking system. But only 400 grams trickled in over the first two weeks as low returns and worries over income tax kept Indians away.

A quiet revolution is going on in India’s defense sector.

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It is set to give an impetus to steel, aluminum and composite materials demand in the country. Recently, US aircraft manufacturer Boeing Co. and India’s Tata Advanced Systems Ltd. (TASL) announced a joint venture to manufacture aerostructures for aircraft beginning with the reputed AH-64 Apache fighter helicopter.

AH-64 Apache

Make in India, in this case, means making Apache helicopters there thanks to a joint venture with Boeing. Source: Adobe Stock / VanderWolf Images

The joint venture, according to media reports, would also then compete for additional manufacturing work packages across Boeing platforms, both commercial and defense.

Burgeoning Private Defense Industry

Currently, as many as 14 Tata companies are providing support to India’s defense and aerospace sector. In addition to TASL. The list also includes Tata Advanced Materials, a company that has delivered composite panels for cabinets and auxiliary power unit door fairings for the P-8I long-range maritime surveillance and anti-submarine warfare aircraft.

Another company, TAL Manufacturing Solutions, has manufactured floor beams out of composite materials for the Boeing 787-9, and provided ground support equipment for the C-17 Globemaster III strategic airlifter. Read more