With a record 7.9 million tonne steel imported and less than expected exported (5.3 million tonne), India was a net importer of steel last year. The trend seems to be reversing this year. In the first eight months of the current year, imports are down 31% while exports are up 12%. One major contributing factor is the rupee?s depreciation (down 16.3% over April-November 2013).
In an indirect way, the higher landed cost of imports provided scope for domestic players to raise prices and the rising level of exports helped them achieve better capacity utilisation in the context of subdued domestic demand. Total steel (including alloys) imports in the current year exceed total exports by only 66,000 tonne and, by the end of the current fiscal, India may become a net exporter.
Category-wise, India has already become a net exporter of semi-finished steel, bars and rods, structurals, HR coils/strip and GP/GC sheets. It is interesting to note that adequate domestic capacities in GP/GC sheets, which not only meet the entire demand for the product but also provide significant export volumes, could not prevent substantial imports of 2,21,000 tonne (83% of the total imports of GP/GC) from South Korea and Japan under CEPA (providing concessional import duties). These two countries are also the source of imports for CR coils/sheets (78%), HR coils (56%) and plates (52%).
This trend will get further strengthened next year, with a progressive reduction in customs duty on these sources. This is unfortunate as it makes imports of these items almost mandatory, which is otherwise mostly unnecessary. It only helps the idle capacities of Japanese and Korean steel mills and adversely affects the market share of Indian producers.
Further, unnecessary imports of this kind run counter to the WTO?s concept of sectoral fair trade and raise the import bill of the country. The onus of long-term damage caused to a specific industrial sector must be shared equally by industry players who were unresponsive at the time of signing the FTAs and the government?s wings concerned, who expected the resultant export growth of segments ? the ones enjoying a corresponding duty reduction ? to outweigh the rising imports in other segments. For the first eight months of the current fiscal, the net deficit of total iron and steel trade stands at approximately R2,640 crore. In the present scenario, it should have turned into a surplus.
A few countries emerged as net steel exporters in 2012. They include China, Turkey, Japan, South Korea and Ukraine. All these countries, with the glorious exception of China, experienced a declining trend in domestic demand. India has a huge untapped demand potential that can not only shore up its domestic market, but also make it a net exporter of steel.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal