News Room - Steel Industry

Posted on 26 Mar 2008

Steel Authority of India, Rivals to Restrict Exports

Steel Authority of India Ltd., JSW Steel Ltd. and four other Indian producers of the alloy agreed to curtail exports to ensure domestic supplies. 

``Steelmakers will exercise self-restraint on exports to enhance domestic availability,'' said Moosa Raza, president of Indian Steel Alliance, a grouping of six companies. The curb won't apply to existing contracts, he said.

Prime Minister Manmohan Singh's Congress party-led coalition has banned exports of wheat, rice and cooking oils, joining China, Malaysia and Thailand in a bid to curb inflation that's at a 10- month high. India's government may impose a tax on steel-product exports and end the import duty to cool rising prices, newspapers including the Times of India reported last week.

``It's obviously to appease the government and the move may make bureaucrats rethink on the restrictive policies they were planning to levy,'' said A.S. Firoz, an independent analyst and former chief economist at India's steel ministry.

Tata Steel Ltd., India's biggest producer, is not a member of the alliance.

Indian steelmakers agreed to reduce prices in January after the government expressed concern about passing on higher costs. Still, prices have risen 24 percent this year, the Press Trust of India reported last week, citing Minister Ram Vilas Paswan.

New Contracts

A halt in steel exports may fail to curb rising prices as the restriction only applies to new contracts, said Chirag Shah, an analyst at Mumbai-based SSKI Securities Ltd. India exports about 5 million tons of steel-products annually, or a tenth of total output, according to the alliance.

``Steelmakers cannot severe their on-going contracts and the effects will only be on incremental exports,'' Shah said.

JSW, India's third-biggest producer, exports three-quarters of its 750,000-ton output of galvanized products, said Finance Director Seshagiri Rao. It produces 3.8 million tons annually.

``We will not export products that have a demand in the country,'' he said.

Steel Authority, the second-biggest producer, exports only 3 percent of its 14 million-ton output. Spokesman R.K. Singhal declined to comment.

``It may impact JSW and Uttam Galva but one is not really clear on the extent because the alliance has not stated the duration of the self-imposed exile,'' said Niraj Shah, an analyst at Centrum Broking Pvt. in Mumbai.