Posted on 12 Jan 2015
Facing a double whammy of rising imports and declining exports,
domestic steel manufacturers are fearing further squeeze in their margins in a
stubbornly subdued domestic market.
Describing the 58% growth in imports and 6.6% dip in exports during the
April-December period as "very harsh," one private sector steel maker
attributed the situation to higher input costs.
"Despite a literal crash in iron ore prices globally, we are deprived of
the benefit domestically. At the same time, we are to pay 2.5% import duty on
coking coal which India does not produce. Due to this, Indian steel makers are
loosing out to their global peers.
With tepid growth in domestic consumption and large scale of imports, we are
not in a position to raise price even if it was an absolute necessity. This is
eating out our margins," said the spokesperson.
India, fourth largest steel maker in the world, imported 6.51 million tonnes
steel during the April-December period of the current fiscal. Exports, on the
other hand, declined to 4.06 MT during the period.
Steel imports are galloping because there is hardly any difference between the
landed and the domestic costs of the alloy, forcing steel makers to roll over
their price for two months in a row, said another source.
"Considering India's 100 million tonnes installed steel production
capacity and a little over four million tonnes of exports, imports should not
have been much a headache; but the problem is our consumption has not been
growing in the desired proportion," he said.
According to Joint Plant Committee (JPC), a unit of the Steel Ministry, India's
steel consumption grew by just 1.4% during April-December period of current
fiscal at 55.24 million tonnes compared to 54.507 MT during the corresponding
period of the last fiscal.
"The slow year-on-year cumulative growth numbers appear to reflect the
lingering effect of economic slowdown and is further depressed by declining
growth rate in production for sale in December 2014 as compared to same period
of last year," JPC recently said.
A senior executive of another private sector firm said the government must try
to contain the free-flowing imports of steel and take steps to boost domestic
consumption.
Steel in India is coming in big volumes from China, Japan and Korea. While
exports is a compulsion for China because of its huge domestic supply-demand
mismatch; Japan and Korea are taking advantage of the free trade agreements
with India.
