Rupee jitters bring double whammy for steel sector

The falling rupee will adversely impact the domestic steel sector as import of various raw materials will become expensive and the cost of servicing debt would also go up, government officials and experts said today.

The rupee slumped 43 paise against the US dollar to trade at a life-time low of 70.32 on strong demand for the American currency.

In general, a weaker rupee supports exports and at the same time protects the domestic industry, including steel, from imports as they become costlier, Joint Plant Committee(JPC) Chief Economist A S Firoz told PTI.

He, however, warned that a weak rupee will adversely affect the Indian industry as it has to extensively depend on imported inputs such as coking coal, steel scrap etc.

Besides, export volumes also can not be pushed because of the robust domestic demand of steel, he said.

India's total export of finished steel increased 16.7 per cent to 9.62 million tonne (MT) in 2017-18 as compared to export of 8.24 MT finished steel in 2016-17.

Domestic steel demand grew at 8 per cent in the first quarter of 2018-19, according to JPC.

JPC is officially empowered by the steel ministry to collect data on the Indian iron and steel industry.

Anjani K Agrawal EY Partner said the weakening rupee will increase cost of debt for many steel producers.

"The landed cost of imported coking coal will also rise. Passing through these cost increases may not be easy as steel is largely a domestic business, particularly in long products," he added.

At the Interbank Foreign Exchange, the local currency opened at a record low of 70.25 a dollar, down from its previous close of 69.89, and weakened further to trade at a fresh low of 70.32, down 43 paise.