In June, government raised the duty on some long and flat steel products by 2.5%. The strong dollar was already hurting overall U.S. export numbers, and the steel industry has suffered amid a surge in cheaper imports.
The increase in steel imports has resulted in continuous market share decreases for local steel companies in India. Among steel producers, state-owned Steel Authority of India (SAIL) and Tata Steel reported increased quarterly production. “The industry has been suffering on account of excessive imports, especially from China, since last three years”, said NC Mathur, president, Indian Stainless Steel Development Association (ISSDA).
“Some of the output cuts might become permanent as the government and market work in tandem to squeeze out the least-efficient and loss-making capacity”, said Li Yaozhong, head of commodities at Beijing Low Risk Asset Management Co.
Closer home, experts view the trauma to be even more acute as Indian demand (for steel) is sluggish which is compounded by growing exports.
The news that Chinese steel exporters wasted no time in cutting prices provoked cries of foul from the US steel industry, and gave politicians sceptical of the pending Trans Pacific Partnership trade agreement new ammunition.
Seshagiri Rao, joint managing director at JSW Steel, India’s third-biggest steelmaker, believes that devaluation of yuan will further sharpen the ability of Chinese steel companies to export to India as they are desperate to export steel at any price.
Despite welcoming the move, AHMSA said recently that the measures were announced too late.
According to India’s steel ministry, total imports of steel products in the 2014 fiscal year were over 10 million tons, a 75% year-on-year growth and they are expected to rise further in 2015.
Shipments reached 62.13 million tonnes in January-July, already two-thirds of the record 93.78 million tonnes in 2014.
Import duty hiked to help domestic players battle cheap Chinese imports, which are slated to increase after China devalued its currency. “The overnight devaluations of the Chinese currency merely add to the unfair competition faced by the European steel industry”.
Steel reinforcement bars used in construction dropped to 2,102 yuan ($327) a ton last month, the lowest price since at least 2003, according to Beijing Antaike Information.
“Today’s action is further illustration of the Chinese government’s active role in manipulating the value of its currency to promote Chinese exports”, Gibson said.
“From any commodity perspective the price in China has effectively gone up and consumers of those commodities are going to respond”, said Gerard Burg, senior economist at National Australia Bank.
