Imports of hot-rolled (HR) coils for the purpose of conversion into cold-rolled (CR) quality coils, estimated at around 12,000 tonne in the month of October, 1999, has put realisations of domestic HR producers under pressure, who anticipate the pressure intensifying once the floor prices on steel items are lifted in January, 2000.
According to HR industry sources, imports of hot-rolled coils in October has been around 30,000 tonne, of which 12,000 tonne are estimated to be CR quality steel. This steel, sources allege, has been coming in at a duty of $ 239 per tonne, despite a floor price of $254 per tonne, which translates into around Rs 12,000 per tonne.
In comparison, prices of domestic HR coils for CR quality coils are currently ruling around Rs 15,500-Rs 16,500 per tonne. While the percentage of imports is almost negligible to the domestic capacity, producers like Steel Authority of India Ltd and Tata Steel are unable to command a higher price with consumers due to the low priced imports.
Another problem being faced by these producers is the increasing overcapacity of HR in the country, which is leading to a serious glut in the market. During the current fiscal, the total domestic production of HR is projected at 6-7 million tonne against a demand of only 5 million tonne. To add to this, imports are expected to touch over half a million tonne.
The HR sector has a total installed capacity of 10 million tonne and has been operating well below its rated capacity for about two years due to the widening demand-supply gap. Against an average rise of 10 per cent per year in input costs, prices of HR have either been stagnating or reflecting a downward trend since 1995-96.
HR producers had alleged earlier this year that in spite of a floor price of $302 per tonne on imports of HR, as per a commerce ministry notification in December last, the January-June 1999 period has seen duty-free imports of HR coils under the advance licence scheme at prices ranging between $190-$220 per tonne.
During the January-June 1999 period, imports of HR coils were estimated at around 2.8 lakh tonne, which implies that an average of 46,000 HR coils was being imported each month. Producers had sought a way out of the domestic glut through exports, planned at over one million tonne this year, but anti-subsidy allegations in markets like Europe and the US, most recently, has closed this avenue as well.
