 "Iron ore")
The government has removed export duty on steel products and raw materials almost six months after it was imposed to rein-in inflation.
In a statement on Saturday, it said that the central government has restored the status quo as was prevailing prior to May 22, 2022 and withdrawn the export duty on iron ore lumps and fines below 58 per cent iron content, iron ore pellets and the specified steel products including pig iron.
The import duty concessions on anthracite/PCI coal, coking coal, coke and semi coke and ferronickel have also been withdrawn.
The notification came late Friday night and is effective November 19.
According to the notification, exports of iron ore lumps less than 58 per cent Fe will attract nil export duty while grades above 58 per cent will attract 30 per cent; exports of iron ore pellets will attract nil export duty.
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The 15 per cent export duty on hot-rolled and cold-rolled alloy and non-alloy flat steel products of 600mm or more has been withdrawn. The ministry of finance statement said that the current measures would provide a fillip to the domestic steel industry and boost exports.
The move came as a major relief to the steel industry that has lined up a massive capacity expansion plan.
“Am glad that there is a roll back as it was meant to be a short term measure and was starting to affect the investment sentiment in the industry,” said T V Narendran, managing director and chief executive officer, Tata Steel.
“The domestic steel industry is grateful to the Hon’ble Prime Minister of India for taking the decision to withdraw the export duty imposed on iron and steel items on May 21, 2022. We are also thankful to the Hon'ble Union Ministers of Home, Finance, Commerce, and Steel for supporting the Industry,” said Dilip Oommen, President, Indian Steel Association and, CEO, ArcelorMittal Nippon Steel India and Executive Vice President, ArcelorMittal.
“This will re-energise and further motivate the industry to move forward with full confidence to put the steel sector towards an inclusive growth path,” Oommen added.
JSW Steel joint managing director and group chief financial officer, Seshagiri Rao, thanked the government and said that it would be a big sentimental booster to revive domestic steel demand particularly when the global steel demand was on a steep decline.
Price correction
After scaling peak levels in April, steel prices had started correcting when the export duty was imposed by the government in the third week of May to tame steel and raw material prices as part of a larger move to combat soaring inflation.
In the domestic market, steel prices have corrected by about 25 per cent since April; globally prices have corrected 30-35 per cent since the peak.
Steel exports
Still, the withdrawal of duty is expected to increase exports. International prices are still weak though there has been some positive sentiment in China during the last week, said Narendran.
“I expect exports to increase as it helps bring the demand supply balance to the domestic market,” he added.
During H1FY23, exports were at 36.01 lakh metric tonnes, down by 53.6 per cent. Hetal Gandhi, Director - Research, CRISIL Market Intelligence and Analytics, said that although demand has been quite robust in the domestic market, the fall in overall exports to the tune of 55-60 per cent over seven months FY 2023 led to limited growth in sales for the players.
“The duty removal will open up the exports market once again aiding volumes for the players. The move will benefit the large integrated players who are predominantly in the flat steel space, as flat steel accounts for 80 per cent of India's finished steel exports as of fiscal 2022,” Gandhi said.
Jayanta Roy, senior vice president, ICRA, pointed out that exports have fallen significantly after May 2022, but some amount of exports was still happening at a discount to domestic prices.
“Removal of the export duty would bring closer parity between domestic and export prices, and leading steel mills can again look at exports as a viable option, which will also address the problem of supply overhang in the domestic market.”
User industry
In a statement, EEPC India said that the decision to withdraw the 15 per cent export duty imposed on iron ore and steel products would boost engineering goods exports and contain the downward trend seen in steel exports.
During October, engineering exports fell 21 per cent primarily due to decline in shipments of steel and its products.
EEPC India had made an earnest appeal to the government to reverse its May 2022 decision to impose export duty on steel and alloy steel items considering its adverse impact on the engineering goods sector, the statement said.
However, the industry body also said that domestic prices should not increase further for the benefit of MSME users.
