As the domestic steel markets of most of the countries are showing signs of slowdown, the markets that are still growing at rates ranging from 4-7%, have become the targets of flush of imports from countries that thrive primarily on exports, like Japan, Russia and Kazakhsthan, Turkey. A few other countries like China, South Korea, Germany and Italy have also been focussing on steel exports to enhance capacity utilisation in their own countries. For instance, South Korea, China and Japan have exported 41%, 19% and 16% of total CR imports to India in the first four months of the current fiscal, while China, Japan and South Korea have together comprised 53% of total imports of HR in the same period, Russia has exported around 33% of total imports of rerollables by India. Import of steel accounting for a genuine shortfall between demand and domestic availability signals consumption growth and encourages domestic producers to add capacities to roll value added products to meet the shortfall. However, a large component of imports that takes advantage of low global price level is what hurts the domestic manufacturers and given the current slowdown, the increasing pattern of this trend is causing worry to the manufacturers.
On the reverse side, some of the major advanced steel producing countries have now become aggressive in complaining to WTO about alleged restriction on export of raw materials and import restriction of finished products. China?s export restriction on nine raw materials which includes bauxite, zinc and rare earths and the latest move on non-automatic import licenses by Argentina and export duties on unprocessed raw materials by Indonesia have been taken up by USA, Japan, Mexico and EU with Dispute Settlement wing of WTO.
This is also accompanied by continued restriction on market access by extending the period of Sunset Reviews on anti dumping and countervailing duty cases. USA has adopted the same game plan against export of HR coils from India and against the backdrop of the strong support garnered by US Steel industry from a large group of US senators this pattern of defensive and inward looking strategies resorted to by the global majors by way of protecting the domestic market is another concern to the producers in the emerging countries.
A common offshoot of the current scenario is the postponement of the investment intentions for capacity creation in steel and iron ore. BHP Billiton, Rio Tinto and Vale have held up investment in their own countries as well as in other countries. Steel makers in China, Russia, Japan, South Korea and India have drawn up investment plans to source iron ore and coking coal in Australia, Mozambique, Mongolia, Afganistan, Canada, Brazil, Russia and India. The slowing down of investment plans are likely to curtail the infrastructural spending in these countries.
The silver lining is provided by gradual, albeit slow economic growth process in the emerging countries. A few specific reform measures coupled with transparent guidelines in resource allocation can still put our economy very much back on track.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal