Some respite for steel makers

STEEL: Tariff up, imports costlier, enabling firms here to raise prices

The finance minister has proposed to increase the customs duty on flat steel import to 7.5 per cent from the present five per cent. Nittin Johari, director (finance), Bhushan Steel, said, “This will help local companies sell more, as imports will get expensive. Also, local steel makers may look to increase the price by one to two per cent, or Rs 500-1,000 per tonne.” Ravindra Deshpande, equity analyst, Elara Capital India, said, “This is good news for Indian steel companies. They have been asking this for some time.”

The current financial year has been a difficult one for makers at home, battling slowing demand amid a high input cost regime. Deshpande said, “Demand growth this year has been excessively below expectations. Companies will (now) try to raise prices by at least Rs 1,000 per tonne.” With the demand slowdown, prices could not be increased to address the higher input costs.

Steel demand in India was expected to grow at a eight to 10 per cent this year. However, at the end of the April-February period, it had risen by only 5.2 per cent. And, imports in these 11 months have gone up by 3.4 per cent, to 6.23 million tonnes, much to the vexation of domestic steel companies, who saw this as a lost opportunity for them. They now hope the increase in customs duty would help bring down imports.

Despite the slowing witnessed in home steel demand, the government’s Economic Survey for the year, tabled on Thursday, was fairly satisfied with the sector's performance and termed it ‘optimistic’. The Survey blamed inflationary pressures, interest rate rises and the depressed global economic scenario for the lower growth in steel demand here.

India consumed 70 million tonnes of steel in 2010-11. The number, assuming a 10 per cent growth rate, should have reached 77 million tonnes at the end of the current financial year. However, the apparent consumption in April-February was about 66 million tonnes and is expected to be no more than 71-72 million tonnes for the full year.