Imposing tariff barriers to block cheaper imports are always perceived protectionist in nature. But here’s one with a twist.
Leading Indian steel pipe makers like Welspun, PSL Ltd are “happy” that the US Commerce Ministry has imposed a jaw dropping 286 per cent duty on some the products they exported to US — one of the largest consumption markets.
This has been done to safeguard the local American pipe-makers from imports from India. To stop a similar trend from Vietnam, an eight per cent duty on similar products has also been imposed.
But how is that a positive?
In technical speak, the duty is applicable on “non-API circular welded standard pipes of 16" and below diameter.” Welspun, the one of the largest player, doesn’t import these specific pipes in the first place. “We are setting an electric resistance welded pipe (ERW) plant of 175,000 million tonne per year (6" to 20") and Coating Plant in US to service our clients in North America. This plant is targeted for commissioning by March 2013 and likely to ramp up to optimal utilisation in FY14. This measure by US to protect domestic industry will help Welspun in coming days and shall have a positive impact," the company further clarified.
The duty currently imposed is preliminary and the department will take a final decision on the same in August. An industry official said, “Indian exporters were getting countervailable subsidies of 286 per cent and that was causing Indian pipes to be really cheap as compared to the local manufacturers. There fore, to offset this, the preliminary import duty of the same value has been imposed till review in August.”
PSL, another large Indian pipe-maker feels that the move is beneficial for the company. It said, "We do not export pipe to the United States, as we have the capacity to produce pipes within the United States for the local market. Therefore, there is no impact on PSL India’s domestic operations, and the impact of import duties for its US subsidiary is beneficial, since competition is thereby restricted.”
Even though the oil & gas activity in the US is reviving, PSL is not seeing free flow of orders. Hence, to tackle that, the company has started to bid for water and structural pipeline business in the US.
An analyst tracking the sector, said, “Normally, pipes are not exported as it’s uneconomical. It makes sense for companies to produce pipes where the market and that is what these Indian companies are doing."
JSW Steel is another Indian steel maker with a plate and a pipe mill in the US. The company produces pipes from 24" (610mm) to 48" (1220mm) in diameter and thus, will not be impacted at all by this decision. The company did not respond to the emailed queries.
JSW’s plate and pipe-mill in the US are also not in particularly good health. The two are still making cash-losses with capacity utilisation below 50 per cent.