 "Tough times prompt VISA Steel to think out of the box")
Steel prices have gone up by Rs 2,000 per tonne in the last 10 days as the domestic producers have stopped selling in anticipation of the government's order to impose minimum import price (MIP).
"Domestic producers will be able to sell their products at much higher price once MIP becomes effective. Hence, they have stopped selling their products in the market," an industry source told Business Standard.
Early this month, the steel ministry had proposed MIP for 40 steel products, comprehensive list of which was sent to the commerce ministry. A notification in this regard is likely to be issued soon, setting the floor price below which imports would not be allowed.
Notification on the minimum import price (MIP) for steel products is expected latest by Monday. "All documents are ready and we are waiting for Ms Nirmala Sitharaman (commerce minister) to return from Nairobi where she is participating in the WTO ministerial conference," said a source in the ministry.
When contacted, India's top steel producers chose to remain silent on the subject.
Since October 2014, domestic steel industry has been grappling with increasing imports of cheap steel. In a bid to protect the industry, the National Democratic Alliance government has taken several steps this year. In September, the government imposed a 20 per cent provisional safeguard duty for 200 days on the import of hot-rolled flat products in coils wider than 600 mm. On December 11, it imposed an anti-dumping duty ranging from 5-57 per cent on cold-rolled flat products of stainless steel for a period of five years.
While the MIP is being welcomed by the domestic steel producers, the user industries are not happy with the cost escalation. They fear that consumption may fall significantly because of the rise in the cost of the final product.
"With the MIP coming in, we see consumption of steel coming down by 20-30 per cent across all sectors, except the auto industry. Car makers usually sign MoU (memorandum of understanding) with steel mills," said Rajiv Vyas, member of the Bureau of Indian Standards (BIS) action committee. "The price trend in steel across the world is downward. However, once MIP becomes effective, domestic prices would go up. This will hit consumption for sure," he added.
As per the Joint Plant Committee data, during the April-September period, consumption of steel rose by 4.1 per cent from last year to 39.14 million tonne. Imports of the commodity were up 42 per cent during the same period at 5.4 million tonne, while production for sale was down 0.5 per cent from corresponding period last year at 45.64 million tonne.
The over-leveraged balance sheets of major domestic steel producers are not just a concern for the companies but also for the banks which have lent heavily to these entities.
In June, the Reserve Bank of India issued a warning that it may be the iron and steel industry's turn to add to the bad loan burden that banks are already reeling under, largely because of defaults by infrastructure companies.
Indian banks are positioned to overcome macroeconomic shocks, including those related to liquidity and interest rates, but face a problem with the overleveraged steel industry that has been hard put to make a profit, said the Financial Stability Report released by the central bank. "As on date, five out of the top 10 private sector steel-producing companies are under severe stress on account of delayed implementation of their projects due to land acquisition and environmental clearances among other factors," said the report.
During the commodities boom, the steel industry expanded capacities indiscriminately. But the recent relentless fall in commodity prices has crippled the industry completely.
Essar Steel, Steel Authority of India, Tata Steel, JSW Steel and Jindal Steel & Power are among the top producing steel companies in the country with heavy balance sheets and stagnant toplines. Among these, Essar Steel is already scouting for a strategic investor to help the company pare its debt. Tata Steel plans to get rid of its non-performing assets like long-product division in Europe.
|
GOVERNMENT INTERVENTION Duty impositions to curtail steel imports |
|
