“This is because, by doing away with the ADD and CVD with effect from February 2, the government has clearly sent out a message to the steel industry that they can not raise prices at their free will, inflating the cost of building infrastructure in which it is putting a lot of money,” an industry source said.
Major steel producers may not resort to price correction immediately, but the reduction in customs duty on a range of products and duty exemption granted on import of steel scrap might put pressure on steel firms to hold the current prices in the medium term. Higher demand for steel may, however, may come to their aid.
Steelmakers are not perturbed with the possibility of higher imports from China, since most of the imports come from FTA countries Japan and Korea. However, they are worried about the Budget proposal to temporarily revoke anti-dumping duty (ADD) and countervailing duty (CVD) on imports from China and other countries even as the prevailing prices are way above the reference price.
“This is because, by doing away with the ADD and CVD with effect from February 2, the government has clearly sent out a message to the steel industry that they can not raise prices at their free will, inflating the cost of building infrastructure in which it is putting a lot of money,” an industry source said.
Saurabh Bhatnagar, partner and national leader, Metals & Mining, EY India, said the reduction in customs and anti-dumping duty on steel imports and zero customs duty on scrap imports will benefit the secondary steel manufacturers to supply steel for construction of roads, ports and bridges, and add to a more cost-effective supply base for steel.
Icra’s Jayanta Roy said that the 2.5% to 5% reduction in customs duty on certain finished steel products and semis from 10-12.5% would affect domestic prices of such products, and thereby, adversely impact the margins of affected players. Import duty on iron and steel melting scrap, including stainless steel scrap, has been done away with for up to March 2022.
The finance minister’s proposals for the steel sector bear the imprint of minister for road transport and highways Nitin Gadkari. Gadkari had been vocal as steel companies were on the price hiking spree for the last few months, mainly taking cues from their international peers. While Gadkari took the matter to the Prime Minister seeking his intervention, steel firms justified the price hike to rising prices of iron ore.
During the April-December period of the current fiscal, India imported 3.21 million tonne (MT) steel, down 42% over the corresponding period last year. During December 2020, import decreased by 41.8% over December 2019. China’s share in the total imports in December 2020 declined to 20% from 27% in December 2019.
