Posted on 12 Mar 2015
India plans to impose quality restrictions on a wider range of steel products to curb record shipments from Europe and other Asian nations, people familiar with the matter said.
The steel ministry plans to add 18 products, including hot and cold-rolled coils and sheets used in cars, pipes and appliances, to a list of steel items that currently need certification from the Bureau of Indian Standards, said two people, asking not to be identified pending an announcement. The proposal has been sent to other ministries for consultation, they said.
As steel demand has waned globally in the past few years, a steady stream of cheap imports has flooded the Indian market, where prices have remained relatively high because inputs are costlier. One way to deter exporting nations without resorting to political trade measures is to require quality checks.
“We have to make sure that sub-standard and cheap steel doesn’t enter the country,” said Jayant Acharya, marketing director at Mumbai-based JSW Steel Ltd., India’s third-largest producer. “The time has come to act quickly.”
Cheaper imports can be checked by imposing stricter quality standards, said Giriraj Daga, a portfolio manager at SKS Capital & Research Pvt.
Steel Secretary Rakesh Singh and Joint Secretary Sunil Barthwal couldn’t be reached on their office phones for comment. C.S. Verma, the chairman of the second-largest producer, Steel Authority of India Ltd., also couldn’t be reached on his mobile phone.
Once feedback is received from the ministries and industry, a final order will be sent for notification to the Bureau of Indian Standards. Companies will be given a notice period before the new rules take effect, the people said.
Higher local output, increased imports and falling exports mean there are 7 million tons of additional supplies in India, compared with 2 million tons of incremental demand, according to steel ministry data.
“Indian steelmakers haven’t been able to make the best use of the fall in raw material prices,” said A.S. Firoz, chief economist at the steel ministry’s Economic Research Unit in New Delhi. “Their costs remain high because of iron ore shortages, high overhead costs and lower plant efficiencies.”
China, the world’s biggest steel producer, has been struggling with a capacity glut at home that has brought down its average steel mill capacity use to a decade-low of 71 percent, according to Bloomberg Intelligence analysts Zhuo Zhang and Kenneth Hoffman. China shipped 2.9 million tons of steel to India in the 10 months ended Jan. 31, almost three times the shipments in the prior 12 months, according to India’s steel ministry.
A decline in the ruble led to a jump in imports from Russia over the past few months, according to data from India’s steel ministry. India has trade agreements with Japan and South Korea that allow tax exemptions on shipments from those nations.
“Putting quality barriers can definitely help but would be inadequate to materially change the strong flow of imports,” said Abhisar Jain, an analyst at Centrum Broking Pvt. “We definitely need tariff curbs.”
India last month raised the provision of levying customs duty on steel imports to as much as 15 percent from a peak rate of 10 percent. The effective rates of tax remained unchanged.
