Finished Steel Imports to Dampen Indian Steel Producers Growth

Data released by the Indian government recently may have come as a damper not only for the country’s steel manufacturers, but also for the steel ministry itself.

Government data showed India’s finished steel imports had jumped 53.3 percent to 2.88 million tons in the first four months starting April 2012 as compared to the previous year’s 1.88 million tons. India may be the fourth-largest producer of steel — but it is also now a net importer.

What are the reasons for such a high figure?

There was good demand in Indian markets due to the automobile and consumer goods sector, as compared to Europe or the US, coupled with a fall in the overseas prices and low production capacity additions to the domestic steel plants. Flat steels are used in consumer durables and fast-moving consumer goods.

The data showed that besides China, imports had come in from South Korea and Japan, and continued to do, because of bilateral trade agreements between India and those nations.

Clearly, India’s steel industry is in a quandary, despite the sector being only partially affected by global economic conditions. In fact, after the ban on iron ore mining, it has been left wondering how to ramp up production and shore up its revenues, with many steel majors complaining bitterly to the government about it. Some steel companies had even cut production figures.

The Government, for its part, tried to do some damage control. The import duty on flat products was hiked earlier from 5 percent to 7.5 percent to curb imports. But the trade agreements (at least with the Asian countries) ensure that the import duty for them is levelled at 4 percent. With no one picking up steel in Europe, the US and even China to some extent because of the economic slowdown, India seemed to be the logical choice for these countries’ dumping of their finished steel.

So how will India’s steel sector end 2012?

Continued in Part Two.

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