Indian Steel Alliance agrees to stop exports

Indian Steel Alliance (ISA), an organisation of key primary steel producers in India, has agreed to halt steel exports with immediate effect to ensure domestic supplies. With brownfield expansions yet to be commissioned and greenfield projects yet to take off, the demand-supply situation has worsened, and India has turned net importer of steel during the recent quarters.

The announcement comes in the wake of a proposal mooted by the ministry of steel to the slash import duty on steel (currently at 5%) to nil. Rising demand and spiralling costs have seen steel majors increase prices significantly since January 2008. However, according to analysts tracking the sector at Emkay Research, halting exports may not bring in great supplies in the domestic market, but will, in turn, be seen as an effort to regulate the steel industry and an indirect move to reduce domestic prices.

ISA members include Steel Authority of India, Essar Steel, JSW Steel, Ispat Industries and Jindal Steel & Power. Tata Steel is not a member of ISA. Similarly, Cold Rolled Steel Manufacturers Association (CORSMA) is also not a part of the statement made by ISA.

According to Emkay analysts, halting exports is a voluntary measure and does not tantamount to a ban. All existing orders will be honoured but fresh exports will be restrained. Further, long-term contracts and export commitments against machinery imported under the EPCG scheme will be met. This implies that exports of products not under long-term contracts will be rolled back and the impact will be minimal. The main export products include GPGC (Galvanized Plain/Galvanized Corrugated) and pre-painted galvanized sheets, which have limited demand in the domestic market.

Steel exports stood at 3.5 million tonne between April and December 2007 of which GPGC accounted for 1.56 million tonne and HR coil/sheet accounted for one million tonne.

Steel Authority of India, a key constituent member of ISA, has an annual hot metal capacity of 14.6 million tonne but exports about 0.5 million tonne. JSW has hot metal capacity of 3.8 million tonne but has an export obligation of $150 million to Duferco.