The standalone cold-rolled manufacturers are in a fix. They can neither absorb any further price hike in hot rolled products nor can they pass it on to the consumers. The woes of the industry stem from two causes.
One a virtual ban on imports of HR Coils for domestic consumption through Non-Tariff Barriers and two DGFT has changed its stance on the issue of mandatory quality control on imported steel.
The Directorate General Of Anti Dumping (DGAD) has initiated anti dumping investigations into the imports of HR coils, sheets, plates and strips from a number of countries such as South Africa, Romania, Venezuela, Australia, Canada and Singapore. The investigations were initiated after the domestic HR manufacturers - Steel Authority of India and Essar Steel filed a petition with the DGAD.
Likewise, in a move that would hinder imports and benefit primary steel producers, the Director General of Foreign Trade (DGFT). It now says the norms that had been mandated for imports of 33 steel items including HRC (hot rolled coil) would continue to be operational unless the Bureau of Indian Standards (BIS) exempts these item from its quality specifications.
These two moves are expected to adversely impact the stand alone cold rolled steel (CR) manufacturers, who procure HR from the domestic / overseas markets and convert them into CR. The adverse impact is primarily on account of the fact that the CR producers are unable to increase their output prices in tandem with HR prices.
Hot Rolled Coil is a basic input for the production of Cold Rolled/ Galvanised / Colour coated and Electrical sheets accounting for 70 per cent of the production costs. Pursuant to the revival of Indian economy and the global upturn since April 2002, the demand for HR Coils sharply escalated leading to shortage situation due to the capacity constraints.
The virtual ban on imports through Non-Tariff Barriers imposed by DCIFT Notification No. 44 and the Floor Prices has resulted in monopolistic pricing by the five indigenous producers and the prices shot up by 45 per cent during the April-October 2002 from Rs.11,500/- to Rs. 17,500/- per MT, claims Cold Rolled Steel Manufacturers Association of India (CORSMA).
This has severely hit the production schedules and the economic viability of downstream industries including the pipe & tube industry, auto sector, white goods and refrigeration industry, steel furniture manufacturers, cycle industry.
The market is not in a position to absorb the arbitrary hikes in prices due to intense competition from imported finished products and substitutes. The Non-Tariff Barriers and high prices of HR Coils are a national problem. Hence, the industry had represented to the Government.
