Says domestic companies should lower prices first.
The prospect of a mid-month price increase in cold rolled (CR) and galvanised steel — used by automobile and consumer durables makers — has abated with the government deferring a decision to impose a safeguard duty on the intermediate product, hot rolled coils (HRC).
The Standing Board on Safeguards, which met today, felt there was no urgency to impose a safeguard duty and said domestic steel companies should consider lowering their prices to beat competition from imports.
| CUTTING EDGE (How share prices of major steel producers performed) | ||
| % change May 8 over April 29* | % change May 11** over 8-May | |
| Bhushan Steel | 64.36 | -6.44 |
| Ispat Ind | 23.39 | -4.73 |
| JSW Steel | 21.84 | -4.12 |
| Tata Steel | 18.67 | -3.84 |
| SAIL | 14.36 | -3.34 |
| Welspun Gujarat | 13.42 | -2.42 |
| Jindal Steel | -2.02 | 3.37 |
| * When steel price increases began ** Govt defers safeguard duty Source: Business Standard Research Bureau | ||
The board also asked the Director General Safeguard (DGS) to examine the issue further and seek views of the parties concerned, including consumers.
Safeguard duty is a provision of the World Trade Organisation, allowing special curbs if it is established that goods are imported at prices lower than the cost of producing these.
Last month, the DGS had recommended the imposition of a 25 per cent safeguard duty on imported HRC below $600 a tonne to protect the domestic industry from cheap imports.
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The recommendation followed an application filed by Essar Steel and Ispat Industries, supported by JSW Steel and state-owned Steel Authority of India Ltd (SAIL), after international prices of HRC fell sharply.
Global HRC prices have collapsed to $410-$415 a tonne now from $1,070 a tonne in the July-to-September period last year. Some importers, however, are quoting prices between $360 and $380 a tonne, which made domestic HRC, ruling at $496 a tonne, uncompetitive.
Imported HRC accounts for 15 per cent of the Indian market of 20 million tonnes.
Commerce Secretary Gopal Pillai agreed that imported steel HR coil is still cheaper than the domestic produce, but turned the argument around to suggest steel companies should consider lowering their prices to beat competition from imports.
"Steel users have brought to our notice that they have appealed to steel makers that steel prices should be reduced further, matching import prices,” Pillai told NewsWire18.
The prospect of a safeguard duty on HRC had prompted CR and galvanised steel majors to review prices over and above the Rs 500 to 2,250 per tonne increase they effected over the past three weeks.
That position has changed. “Had the safeguard duty been imposed, we would have increased prices by Rs 500 to Rs 1,000 a tonne because HRC prices would have gone up. Now there is no need to increase prices,” said Neeraj Singal, managing director of Delhi-based Bhushan Steel. Bhushan, which makes CR and galvanised steel, raised prices by Rs 500 a tonne from May 1.
An official of Mumbai-based Uttam Galva Steels, which raised prices up to Rs 2,250 a tonne in phases from mid-April to May 5, said the same thing.
Meanwhile, HR producers expressed dissatisfaction with today’s deferment. Anil Sureka, director-finance, Ispat Industries, primary steel producer, said the government decision would impact the health of the steel companies. “Cheaper material will be imported and it will hurt our bottom-line,” he said.
Another HR producer said, there was a huge global surplus capacity which was being exported to companies like India, where demand was firm though margins were thin.
“Any delay in correcting the situation will have serious adverse effect on the sustainability of the industry. It is in the long term interest of the country to avoid any damage to the steel industry. Otherwise India will have to import steel at a much higher cost,” he said.
The stock prices of steel fell sharply today on news of the deferment (see table). They had risen significantly over the past few weeks on prospects of a safeguard duty being imposed.
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May 9: Safeguard duty on HR coil likely as imports rise