Reviving-India’s-Steel-Manufacturers

Reviving India’s Steel Manufacturers

The concerns of the current scenario in the country regarding the steel industry can be best captured with the acronym PCP, wherein P stands for protection against imports, C for capacity rationalization and P for price maximization.

In 2016, the government, through its Minimum Import Price, Safeguard Duty and Anti-Dumping measures, tried to protect the Indian steel industry against cheap and injurious steel imports. Once trigger prices for wire roads, semis, CR, plate, HRC and electrical sheets are imposed, the local steel industry would potentially obtain a higher return for its products.

Also, the changes in the global market scenario also helped the indigenous producers. Export offers of Chinese Hot Rolled Coil (HRC) 520 USD/t FOB from 256 USD/t FOB in 10 months. However, if viewed against the rising global prices, the argument of import parity in deciding domestic prices is just not valid. The Minimum Import Price lasted till February 2017, Safeguard Duty would end somewhere in the middle of 2018 and Anti-Dumping measure would last for another 5 years, and due to environmental guidelines, we are yet to see witness any significant capacity rationalization.

All being said, the cabinet has cleared a fresh policy for India’s steel industry which seeks to boost the country’s steel production by the end of 2030. The Indian steel makers have been immensely hurt by the sudden and large influx of steel imports from nations such as Japan, China and South Korea, and how far can this policy take the country is the question.

The government’s policy does not mention how it plans on achieving the stated goals, leaving the majority of private steel makers baffled. And given the global overcapacity, the private sector, which is already under pressure, does not expect any significant improvement in the coming years.

By the end of 2030, the national steel policy, 2017 seeks to increase the current production capacity of 100-120 million tonnes (mt) to 300 mt. Also, it aims to increase the current, per capita, finished steel consumption of 61 kg to 158 kg.

Abhisar Jain, analyst at Centrum Broking, mentioned that the policy, as such, is a positive step towards infrastructural development. However, implementation and approvals need to fall in place if the government wants to see a change in the coming years.

Thus far, in the previous 10 years, the country has added steel capacity at a rate of 55mt a year. This makes the new projections exorbitant and there is no immediate relief for steel capacity up for sale.

But, the large steel producers are rather positive. The new steel policy can put the local manufacturers in a growth spot, where the demand for steel would grow by 5% in the current year itself. As compared to the average global consumption of 210 kg, there’s a lot of room for Indian steel manufacturers to grow with current per capita consumption of 61kg.

The steel policy’s focus on infrastructure-led growth would support the demand and would help the manufacturers achieve cost efficiency as well.

For more of such updates on India’s import-export policy fluctuations, keep following TNL’s blogs.

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