India proposes to reduce duties on steel, stainless steel products

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India

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A budgetary proposal by the Indian government to reduce steel duties has divided the Indian steel sector.

India proposes reduction in steel duties

In her 2021 budget speech presented in parliament earlier in the week, Finance Minister Nirmala Sitharaman proposed reducing customs duty on imports of semi-flat steel. She proposed cutting the duy for the steel, used to make ships, bridges, line pipes and other equipment, from 12.5% to 7.5%.

Furthermore, the customs duty on longs — used to make rails and wire rods — may also be reduced from the present 10% to 7.5%.

Another proposal called for revoking anti-dumping and countervailing duties on straight length bars and rods of alloy steel, high-speed steel of non-cobalt grade flat-rolled product of steel, plated or coated with an alloy of aluminum or zinc.

At least initially, the move could be interpreted as India opening its doors to cheaper steel and reducing the tax on shipments of the alloy amid surging prices at home.

The chief executives of some of global steelmakers such as JSW and Tata Steel have opined that this would not allow any increase of flow in these steel items. Meanwhile, others fear it will have a negative impact on the profitability of domestic players.

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Impact on imports from Europe, US

Domestic players are still examining how the move will impact the flow of Chinese steel products into India. However, experts say the chances of imports to India from Europe and the US going up seem slim. Prices there, as compared to those in India, are higher at $800 a ton and $1,150 a ton, respectively.

Speaking to moneycontrol.com, Seshagiri Rao, JSW Steel’s joint managing director and group CFO said they did not anticipate any problems because of the proposed reduction.

Rao referred to India’s domestic steel prices, which are lower as compared to those in other countries from which India imports.

What about China?

As for China, Indian steel companies are divided.

Like other nations in the region, local players, too, are watching the markets closely in the lead up to the Chinese Lunar New Year holiday. Demand for flat steel imports remained weak in the week to Feb. 2, as many buyers predict prices to go down even more. They believe it is only after the end of the Chinese holiday that will see the real direction in which global steel prices go.

Rising demand

In India, the ongoing border tension with China and the Indian government’s Make in India campaign have seen demand for special steel and value-added products go up in the fourth quarter of 2020.

According to a report in LiveMint, JSW Steel, for example, saw a jump in demand in these products. It made a dramatic recovery around its steel production and financial performance by the December quarter after COVID-19 disrupted operations through most of the first quarter.

JSW Steel saw a jump in demand since industrial component manufacturers sought to replace their dependence on Chinese imports with alternatives manufacturer locally. Demand also increased for specialized product grades from auto component manufacturers, bearings and forging industry.

Nevertheless, in its first reaction to the budget proposal, the Indian Stainless Steel Development Association said it would open the floodgates for imports of Chinese stainless steel with temporary revocation of anti-dumping and countervailing duties. In turn, that would hurt domestic manufacturers of such product.

Suspension of these steel duties will undermine domestic manufacturing and employment generation, in addition to defeat the Make in India movement, it also argued. The industry group also argued the cut offered an “unintentional gift” to Chinese companies and will hit the domestic stainless-steel industry, according to this report.

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