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The government on Friday imposed minimum import prices (MIPs) on specific steel products to protect domestic players from cheap imports from China and other countries. Integrated domestic primary steel producers such as Sajjan Jindal-led JSW Steel, Jindal Steel & Power, state-owned Steel Authority of India and Tata Steel would be among the largest beneficiaries.
The move, however, would not apply to the stainless steel sector. Also, import for American Petroleum Institute (API)-grade steel used in the petroleum and natural gas industries are exempted from the MIP.
MIPs are valid for six months only, which could trigger uncertainty in the market. But a government official said these may be extended further.
For ingots, billets, blooms and slabs, MIP now stands at $362, $352 and $341 per tonne, respectively. Similarly, various flat-rolled products of iron or non-alloyed steel (of a width of 600millimetres or more) will now attract different MIPs - in the range of $445 to $752 per tonne. Hot-rolled bars and rods, of iron, non-alloyed steel as well as alloyed steel, will also face MIP of around $450 per tonne.
"We certainly welcome the move and hope that they (government) extend it beyond six months," Ravi Uppal, chief executive officer, Jindal Steel told Business Standard. Indian steel companies also hinted at price revision post the MIP imposition. "We will need to check the gap between the MIP level and the distressed local steel price and then perhaps a correction will happen in the local prices," Uppal added. The MIP notification - issued by the Directorate General of Foreign Trade (DGFT) - is valid for six months.
"We may extend the timeline of six months, if needed. It was clear that our domestic industry was not getting the benefit of safeguard duty and anti-dumping duty," said a senior steel ministry official.
On September 14 last year, the government imposed a 20 per cent provisional safeguard duty for 200 days on the import of hot-rolled flat products in coils of a width of 600 mm or more.
Moreover, on December 11 last year, the government imposed anti-dumping duty ranging from 5 to 57 per cent on cold-rolled flat products of stainless steel for a period of five years. The duty was imposed on imports from China, South Korea, European Union, the US, South Africa, Thailand and Taiwan.
Steel companies had witnessed poor earnings in the December quarter as realisations took a hard hit because of increased imports despite a five per cent increase in domestic demand. "With this measure now, domestic steel producers should be able to grab some share in the increasing domestic demand, from which we were completely off due to cheap imports," Uppal said.
N C Mathur, president, Indian Stainless Steel Development Association (ISSDA), said the government's move may "slightly" help the ailing steel sector. However, he was disappointed that the stainless steel sector was left out. "We are again disappointed that stainless steel products have been left out of the ambit of MIP mechanism. It is noteworthy that stainless steel industry faces exactly similar danger of what the carbon steel sector does… As a result of excessive imports, almost all stainless steel players are under severe financial stress," Mathur said.
Meanwhile, Sanak Mishra, secretary general at Indian Steel Association said, the government has covered quite a few important products such as hot-rolled coil, sheets and strips along with cold-rolled products. He said it was the right move for the domestic steel industry.
The consumer segment, however, is not happy with as it fears a price hike in steel products in the range of Rs 3,000-5,000 per tonne in the next 3-5 months. Moreover, the consumer segment, whose input cost will shoot up significantly, also faces the threat of closedown, leading to rise in non-performing assets for the banks.
"MIP imposition is going to show its impact in the next 4-5 months when manufacturing sector shrinks and NPAs rise for banks in a much bigger way," said Nikunj Turakhia, head of the Bombay Iron Merchants' Association board.
