It is interesting to observe the fast changing realities in steel market. Only two months earlier, availability and prices of coal and iron ore were the main concern for the steel plants with three producers having nearly 70% share of which indicates global seaborne trade of iron ore ruling high. But demand fluctuations in steel sector played havoc.
Depletion of steel procurement by the major consuming segments forced the price of raw materials to come down. For coking coal and iron ore, the prices have come down by 12% and 14% respectively during the past two months.
Recently, Vale abandoned quarterly pricing formula based on previous quarter prices and adopted average prices for the current quarter (October-December) and adjusting the same on the actual prices after the quarter is over. With market sentiments dipping continuously, the price advantage of raw materials can be short lived.
Unpredictable market situation has led to closing of a few BFs by global majors in Europe.
The global crude steel production, however, has clocked 8.2% growth in the first ten months of the current fiscal.
India?s total finished steel production grew by 9.3 % during H1 of FY12; the consumption went up by 1.8% with exports providing the outlet of excess production with 46% growth.
The problem is that the biggest US steel market getting shrunk to exporters by the spate of trade measures being adopted by US and the urge by the domestic steel producers to capture internal demand through higher utilisation of capacities.
The suspension agreement with Russia for HR Coils import (reference price) entered into in 1999 has been sought to be revised upwards in tune with current price level to restrict low priced imports.
Indian export of HR Coils is facing high countervailing duties in USA. China, the largest steel exporter, has been threatened by anti dumping and countervailing duty imposition by US steel producers.
The charges against China are widespread and not confined to steel alone. These relate to currency manipulation by China to promote exports, restrictive measures to curtail export of raw materials from China, subsidies in pricing of raw materials to encourage domestic industries, VAT exemption and other tax relief measures to promote export of equipment, machinery, electrical equipment etc. and thereby encouraging indirect export of steel by China to USA which ultimately undermines the viability of US manufacturing leading to massive loss of employment and increasing trade deficits.
US Trade Administration is under constant pressure by US manufacturing sector led by steel industry to adopt all possible steps to keep imports down.
These developments would necessitate immediate reorientation of Indian export strategy in finding new destinations away from the traditional developed markets.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal