Steel firms cheer China quota

The domestic steel industry has welcomed a proposal by the Chinese government to impose quotas on steel exports. The industry is of the view that the move will have a positive impact on both the price and the volume of steel exports out of India.

Qi Xiangdong, vice-secretary general of China Iron and Steel Association, on Tuesday said China could consider imposing quotas if the steel exports did not remain within the government target. The Chinese exports have surged to 5 million tonnes in the last month alone compared with 25 million tonnes in the whole of 2006.

Earlier, the Chinese government, in an attempt to discourage exports, had scrapped rebates on exports of many steel products, while reducing rebates on high, value-added steel products to 5 per cent. But this did not have any impact, going by the last month's export volumes.

The idea of export quotas is, however, still being drafted and has not been submitted to the Chinese government for approval.

JSW Steel CFO Sheshagiri Rao said, "Such measures currently being undertaken by the Chinese government are a clear sign that the country is discouraging exports, which is a positive step for the Indian industry. Their (Chinese) net exports are projected to come down to 10 million tonnes this year from 25 million tonnes in 2006. The Indian companies, as a result, will gain higher realisations and better margins."

The Sajjan Jindal-led JSW Steel is a major domestic exporter accounting for 20.8 per cent of the country's 5 million tonnes of steel exports last year.

Ankit Miglani, director, commercial, Uttam Galva Steel, said, "The proposed imposition of an export quota by the Chinese government will definitely help improve the procurement prices of domestic steel as well as international steel. Integrated steel companies such as Essar, SAIL, Ispat, Jindal and JSW will directly benefit from this move."

Uttam Galva now sells about 70 per cent of its galvanised steel and 50 per cent of its cold-rolled steel production in the export market to over 120 countries.

The proposed quota will be very helpful as the domestic steelmaking costs are likely to go up as a result of rising raw material prices.

J Mehera, resident director of the Essar group, said, "The Chinese government has been trying to control its steel exports. This is a step to regulate its own economy. This may lend some stability to the steel market."

According to the Iron and Steel Statistics Bureau, an international statistical information data provider, the domestic steel production increased by 4.9 per cent in January and February to 7.4 million tonnes.