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The operating capacity of India's stainless steel (SS) mills has declined to the alarmingly low level of 55% due to cheap imports from China and other Free Trade Agreement (FTA) countries amid weak demand. The production capacity has come down from 65-70% level a year ago.
Speaking on the sidelines of the announcement of Indinox 2015, a two-day SS industry event scheduled to be held between January 24 and 27, 2015 at Gandhinagar, N C Mathur, president of Indian Stainless Steel Development Association (ISSDA), said, "The SS mills have steadily invested $5 billion since its peak days of 2006-07 to create an overall installed capacity of around 5 million tonnes. Against that, we estimated a total production at 2.6-2.7 million tonnes in 2014-15."
This is because of dumping Chinese goods into India with some of them of substandard quality with low nickel and chromium content in it, Mathur said.
India's production capacity has drastically come down in the last 6-7 months as imports from China, Taiwan and Korea have shot up by 150%. According to industry body ISSDA, India's SS imports have gone up to around 40% of annual consumption.
Until the last financial year, total import from all countries combined was 100,000 tonne. But total imports from China alone have shot up to 250,000 tonne in the first half of the current financial year. India's annual SS consumption stands at 2.7 million tonnes.
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"The biggest problem Indian SS mills face is high electricity and logistics cost, unbearable rate of interest on working capital, continuous investment on pollution control equipment etc. Raw material exports from China attract high duty of upto 40% to discourage shipment of inputs like SS scrap, ferro nickel. Over and above, the Chinese government is incentivizing upto 13% on export of SS, apart from low interest rate on working capital loan and cheap power there. The industry will be protected only with a minimum differential duty of 7.5% which currently exists at 5%," said Hiten Bhalaria, managing director of Bhalaria Meal Craft, a SS utensil manufacturer and exporter.
Jindal Stainless has invested around Rs 12,000 crore in its 1-million-tonne greenfield project in Odisha, which is currently operating at 30% of its operating capacity. Its Hisar facility is currently operating at 60-70% capacity.
Similarly, the Salem steel plant by the Steel Authority of India Ltd (SAIL) has invested heavily on capacity additions.
"When Prime Minister Narendra Modi is emphasising on 'Make in India', here is an industry which is bleeding due to imports despite having enough production capacity. We certainly need protection in terms of 'anti dumping duty'. The difference between raw material and finished products imports currently stands at 5per cent in India as against 10% in China," said Mathur.
Free trade agreement is another area where the government should look bilaterally. Currently, India is at receiving ends with import from FTA countries rising significantly without any jump in exports.
With crude stainless steel production at 3 million tonne, India ranks as the third largest producer and second largest consumer of stainless steel. The market for 2013-14 was at 2.5 million tonne of which flat products accounted for approx 2 million tonne. With a low per capita consumption of 2.1 kg (as against the world average of ~5 kgs) there lies a huge potential for future growth but slowdown in sectors such as infrastructure, railways, seaports, airports, highways, and bridges etc. have been major obstacles.
Bhalaria said that the European Union has already initiated investigation against Chinese dumping of SS which India must follow.
