Anti-dumping duties, MIP on steel products to help firms: ICRA

The imposition of anti-dumping duties (ADD) on hot and cold rolled steel products for six months will help the domestic firms brace against a weak demand environment, ratings agency ICRA said today.

Besides, the extension of the minimum import price (MIP) on 66 products for 2 months will benefit the industry, particularly the firms manufacturing long products, it said in a statement.

"ICRA expects that imposition of provisional ADD on hot rolled and cold rolled coils for six months will help domestic flat steel players overcome challenges posed by a weak domestic demand," it added.

Additionally, the extension of MIP on a trimmed list of steel products will benefit the industry, especially long steel players which do not attract any ADD as of now, it said.
 

ICRA Senior VP and Co-Head Corporate Sector Ratings Jayanta Roy said: "India's steel imports, which fell by around 29 per cent y-o-y in April-June quarter of the current fiscal largely due to MIP and Safeguard Duty, are expected to reduce further in the coming months, thus helping domestic mills regain lost market share."

Domestic hot-rolled coil (HRC) prices witnessed a drop in July 2016 on account of weak demand and subdued Chinese export prices, he added.

However, after the imposition of ADD in August 2016, HRC prices have increased by Rs 1,500 per tonne and are expected to remain buoyant in the near term as domestic HRC prices are still cheaper than landed cost of Chinese import offers by about 13 per cent, Roy said.

"Nevertheless, in ICRA's opinion, given the marginal demand growth of 0.4 per cent in Q1 2016-17 and an overcapacity-related concern in the domestic market, steel prices are unlikely to increase significantly from the current levels unless demand growth strengthens," he said.

In such a scenario, an expected revival in rural demand following a normal monsoon after two years and the likely rise in discretionary consumption after 7th Pay Commission payouts, remain critical for an improvement in domestic steel consumption in the second half of this fiscal, Roy added.

Domestic steel prices have increased in the second week of August 2016 post the imposition of ADD.

However, given the weak domestic demand, the extent of increase has been only around 5 per cent from the July 2016 levels and currently remains lower than the previous peak levels achieved towards the end of May 2016.

"Steel demand in India remains soft during the second quarter because of lower construction activities during monsoon. This, coupled with the higher coal costs and a limited price rise off late, will keep the operating profit margins of domestic steel companies under pressure in the current quarter," Roy said.