Steel consortium seeks import duty hike from 5% to 15%

The Indian Steel Alliance (ISA) is seeking the government's protection from the rising steel imports to the country. It has sought an increase in the import duty, from the current level of 5 per cent to 15 per cent.

According to ISA - a consortium of Indian producers such as Essar, Jindal and Ispat - rising imports from Ukraine and Russia and the rising domestic production in China are good reasons for domestic players in India to worry about the continued pressure on the price of finished steel.

According to government sources, net import of steel between April-December 2005, has already crossed 3.5 million tonne, or roughly 10 per cent of the total domestic production in India on an annual basis.

By the close of three quarters in the current financial year, steel imports have already crossed the 2.5 million tonne imports during the whole of the year 2004-05.

According to government sources, increasing imports from CIS countries is partly due to the change in the dynamics of the world steel market, triggered partly by some changes in China's steel import policy. With rising domestic production, China has created artificial blocks on imports from CIS countries, allowing the excess capacity in countries such as Russia and Ukraine, to reach common markets that have found their way into India.

"Imports from the CIS countries have gone up by as much as 120 per cent in 2005. Apart from Russia and Ukraine, we are also witnessing new players from Egypt and Iran too, exporting steel to India. Even China has turned a net exporter of steel, as far as India is concerned," said a senior official at ISA.

China's ever increasing capacity of steel production is also expected to reach new heights in the current calendar year. From a total production 349.4 million metric tonne in 2005, the excess production (over domestic demand) in 2006 in China is expected to around 116 million tonne.

In 2005, China contributed close to 31 per cent of the total steel produced in the world, which stood at 1129 million tonne.

While plans are afoot in China to create fresh capacity by closing existing small and inefficient mills, the rising rate of production continues to worry smaller players such as India, who play in the world steel market.

According to ISA officials, domestic steel prices slipped by as much as 30 per cent since April 2004. The effect of price erosion of this magnitude has already started showing on the quarterly results of Tata Steel, which reported a 15-per cent drop in net profit in the third quarter.