Major steel producers extended an olive branch to the government on Tuesday, giving an undertaking to voluntarily halt exports to check the rising steel prices. At a meeting with steel secretary RS Pandey, companies agreed to exercise ?voluntary self-restraint? on exports to augment domestic supply.
FE had reported on Monday that the steel ministry had forwarded a proposal to the finance ministry to abolish the 5% import duty on steel products to curb prices. Another proposal being toyed with was to levy an export duty of 10% on steel products.
Representatives of companies like Steel Authority of India Ltd, JSW, Ispat Industries and Essar Steel met the steel secretary on Tuesday under their joint body, the Indian Steel Alliance (ISA), and said they would not enter into fresh export contracts. However, existing export contracts would be honoured.
Tata Steel is not an ISA member and was not present in the meeting. The steel secretary is expected to urge Tata Steel to also observe the restraint while ISA would also make a request.
Sources said the move is aimed at placating the government. However, the measure is temporary and applicable only for the next three months.
The country exports about 5 million tonnes of steel a year and the companies enter into long-term export contracts with their buyers, usually for a year. The move would have a negligible impact on the bottomline of the companies as prices in the domestic market are high and there?s enough demand at the moment.
Since prices in the international market is a tad higher than the domestic market, it makes sense for the companies to export for higher realisation, leading to price rise domestically from supply-side constraints. While the domestic demand for steel is growing at 13%, supply is growing at only 6%.
Steel prices in the last four months (December-March) have trebled in the international market from an average of $300 per tonne to $900 per tonne. In comparison, prices in the domestic market have risen by only Rs 6,000 during the same period and are ruling at around Rs 33,000-34,000 per tonne.
