The statistics on steel imports to India speak for themselves.
Steel imports went up 72% in the last fiscal year to 9.3 million metric tons, of which South Korea and Japan together sent 3.5 mmt. They’re still going up. In the first two months of this fiscal year, the situation got worse, with shipments from Japan at 111% and from South Korea 51%.
Fitch Ratings, for example, in a recent report, said it, too, did not expect the Indian government’s recent tariffs on the two free trade agreement partners to increase customs duties on steel imports would alleviate the pressure on Indian steel producers. The higher customs duties will likely result in only a marginal increase in the landed costs of imported steel products.
What Indian steel companies are hoping is that, just like in the US, the Indian government starts thinking of imposing anti-dumping and safeguard measures. Contrary to their expectations, the government is said to be actively toying with the idea of signing a free trade agreement with the Philippines. It also extended a previous deal to supply high-grade ore to Japan and Korea.
Steel in Free Trade Agreements
Steel is one of the many commodities that make up an FTA. At the time of signing its FTAs with Japan and Korea, the global steel scenario was very different compared to the one seen today. It was flourishing and market demand for quality steel was high, both in India and abroad. Now, in 2015 though, the situation is downright bleak.
India represents a growing market, which will require copious amounts of steel for infrastructure and other sectors. So nations such as China, Japan and Korea are dumping inferior steel into the Indian market. The foreign steel is being bought and specified because of its attractive price range.
Many here feel that the FTAs that India signed with Japan and Korea are flawed. Under these agreements, duties paid on imported finished steel products from these countries were given a waiver of 5%. Import duties on goods imported from these two countries was 2.5% compared to the usual duty of 7.5%.
Then Vs. Now
While such FTAs may have worked before, experts are of the opinion that India’s deals with South Korea and Japan weighed heavily in the latter’s favor. The Indian steel ministry already highlighted these concerns to the government, which eventually came around to the view that steel should now be removed from the FTA list. Unfortunately that’s not going to happen any time soon.
Some steel leaders here have pointed to the recent passage of the Leveling the Playing Field Act. This legislation, they said, was designed to give American companies new ways to fight unfair trade practices. That’s the way the Indian government needs to go if it is to protect its own steel industry.
The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.