The glut in the global steel market, which led to an influx of cheap imports into India and a series of steps by the government to protect the domestic steel industry, might not end anytime soon.
In what indicates that threat of low-priced imports are here to stay, the world capacity utilisation ratio of the alloy climbed upwards in the current year: from 66% in January 2016 to 69.6% in November 2016.
Since the import barriers set up by India are transient in nature and already under attack by exporters — Japan recently dragged India to the WTO citing latter’s minimum import (MIP) prices have flouted global trade rules — these can’t be sustained for long either.
So only structural reforms that will help cut costs and improve productivity could enable the domestic steelmakers to acquire competitiveness in the domestic and global markets, analysts feel. Reference price, a close proxy of cost, of HR coil produced locally, for instance, was $356.56 per tonne in January 2016, while the corresponding Chinese figure was $308.98 per tonne.
That means the price of domestic HR coil was 15.4% higher than imported from China in January 2016.
After MIP was implemented in early February, domestic HR coil price fell to below that of the Chinese variant and in August 2016, stood at $412.31 per tonne against Chinese reference price of $419.55 per tonne.
Clearly, cost advantage enjoyed by Chinese imports in India was offset by the MIP policy. But the question is if this is sustainable.
Latest statistics from the World Steel Association (worldsteel) puts global crude steel production at 132.4 MT in November 2016, a jump of 5% over the corresponding levels in November 2015.
The capacity utilisation ratio at 69.6% in November 2016 is 2.5% higher than the November 2015 level. With demand not keeping pace with the projections made earlier, the over-supply situation is unlikely to ease in 2017, making it harder for India to safeguard domestic producers via barriers like the MIP.
Already, New Delhi has lifted the MIP on several products: it was originally in place on 173 products and in August, 2016, the protection was limited to 66 products and after one more extension, the MIPs expired on December 4.
While selected items of steel continue to be subject to anti-dumping duties and a few, including HR coil, will be under (declining) safeguard levies till March, 2018, there are two opinions even within the government on how long these can be kept.
Cumulative global crude steel production during January-November period in 2016 stood at 1,468 million tonne (MT), 0.4% higher than that in the same period in 2015.
The author of the article is Dibyajyoti Bhattacharjee