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| Cheaper Chinese imports may spoil Indian steel party |
| Newswire18 / Mumbai Jul 09, 2010, 00:23 IST |
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 Rising imports of cheaper steel from China is crippling the Indian steel industry, that too, when demand outlook for the alloy is robust due to strong economic growth in the country.
“China has dumped over 1 million tonne of structural grade steel (in India) at a much cheaper rate during May-Jun. Due to this, the domestic steel industry is facing severe problems,” said steel trader Dhanesh Mehta, owner of Delta Iron and Steel Co.
He further added that the structural products from China are lower grade and are used in the infrastructure, engineering and fabrication segments in place of the locally produced standard and good quality structural steel. The Chinese steel is also cheaper by around 15-16 per cent than the Indian steel.
At present, basic price (excluding excise duty and freight rate) of IS 2062 Grade B is Rs 34,000 a tonne, much higher than all-inclusive Rs 32,000 a tonne for Chinese structurals, traders said.
China factor
Traders say that the shipment from China has been on the rise over the last few months primarily due to the European debt crisis. “Demand for Chinese steel has declined sharply in the European market due to the debt crisis. Owing to this, China is shipping huge quantities of the alloy to India, in turn creating a glut here,” said Ashokbhai Thosani, owner of Arihant Steel Corp, a steel trading company.
China annually produces over 600 million tonne of steel and exports nearly 200 million tonne. Europe, Turkey and India are the key importers of Chinese steel.
Most traders do not expect China's plan to scrap the 9 per cent export rebate on select steel items to be of any help to the Indian steel industry.
“There is a loophole in the Chinese export rebate policy. Boron steel is excluded from the list of commodities placed under abolishment of export rebate,” said Mehta of Delta Iron and Steel.He fears this may enable Chinese traders to ship structural steel to India as boron steel—a strong but light weight alloy widely used in cars.
In its bid to ease trade frictions, the Chinese government has decided to remove, from July 15, the 9 per cent tax rebate it offers on hot-rolled coil, sections, some cold-rolled coil products and hot-dipped galvanised coil.
On the Chinese central bank's decision to make the yuan more flexible, most traders said it would be too early to comment.
“China is unpredictable. The decision on the yuan revaluation may not necessarily lead to any material change,” said a city-based steel trader.
Since July 2008, the yuan had been pegged at 6.83 to the dollar. During 2005-08, China allowed the currency to strengthen 21 per cent but during the financial crisis, the central bank set a fixed exchange rate to protect the country's exports. China is now facing international pressure to allow its currency to strengthen as a weaker yuan is giving an unfair trade advantage to exporters there.
India demand
India's steel demand is expected to rise 10 per cent during 2010-11 (Apr-Mar) on the back of increased consumption from auto and infrastructure sectors, traders said.
“Demand from the auto sector is seen 20-22 per cent higher compared with last year's, while that from infrastructure may rise over 50 per cent year on year,” said Vinesh Mehta, president of Bombay Iron Merchants' Association.
India produces over 60 million tonne steel annually and its consumption is also around the same level.
Economic growth is expected to prompt development in the infrastructure sector through expansion of roads, ports and bridges, said Vinesh Mehta.
In 2009-10 (Apr-Mar), Indian economy grew 7.4 per cent. The Reserve Bank of India has projected an 8.2 per cent growth for 2010-11.
The Centre for Monitoring Indian Economy, however, expects the economy to grow 9.2 per cent this financial year on the back of rebound in industrial, services and manufacturing sectors.
Latest reports suggest that growth for the industrial sector, including construction, would be 9.6 per cent as against last year's 9.2 per cent.
In its bid to boost economic growth, the government has announced an ambitious plan to build 24,000 km National Highways across the country by the end of 2010-11.
After a difficult year in 2008 amid global financial crisis, buoyancy is returning to the automobile sector in the country piggybacking the overall economic growth.
According to the Society of Indian Automobile Manufacturers, the country's passenger car sales rose 30.5 per cent year on year in May to 148,481 units. It was the 11th consecutive month that domestic passenger car sales rose more than 20 per cent on year.
A surge in steel demand is for certain. But cheaper Chinese imports are likely to become the party pooper for the local industry.
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