Stainless steel makers cut prices by 7-10% to match imports, call for tariffs

However, utensil makers oppose any duties on cheaper steel, saying it will make exports uncompetitive

Stung by cheap imports from Asean (Association of Southeast Asian Nations) and free trade agreement (FTA) countries, stainless steel manufacturers have cut prices to 7-10 per cent below the cost of production.

Stainless steel imports have witnessed a significant increase in the nine month period between April – December of the current financial year. Against 307,266 tonnes in all of FY2013-14, total import in the first nine months of the current financial year has been 423,894 tonnes, an increase of almost 38 per cent. Another 100,000-150,000 tonnes of further imports in the last quarter of FY2015 cannot be ruled out, according to industry experts.

 

Of the total imports so far, China accounts for the lion’s share of almost 35 per cent. Imports have also increased from countries such as Malaysia, Thailand and Vietnam where India has signed an FTA to import stainless steel duty free with a mandatory value addition of 35 per cent.

“There is no room for 35 per cent value addition in stainless steel. Mills in Vietnam and elsewhere are importing hot-rolled sheet to convert into cold rolled which entails not more than 10-15 per cent of value addition. Thus duty free import at the cost of domestic mills does not make any sense,” said N C Mathur, President, Indian Stainless Steel Development Association, and an advisor to Jindal Stainless Ltd.

India’s stainless steel industry has invested heavily on capacity addition over the last four years, going from 3.5 million tonnes (mt) to five mt.

China’s stainless steel industry, meanwhile, has gone from seven mt of capacity in 2010 to 17 mt now, — largely with government support. However, with demand increasing to 14.6 mt, it still has a surplus of about 2.5 mt. While raw materials like ferro chrome are available at low prices, the government there has also subsidised electricity and interest on working capital loan used for stainless steel manufacturing. This, in turn, makes the Chinese cost of production 30-40 per cent cheaper than India’s.

India’s largest stainless steel producer Jindal Stainless reported a loss of Rs 255 crore in the second quarter ended September 2014 on revenue of Rs 3,304 crore. During Q2, sales volume increased around one per cent to 2.64 lakh-tonnes from 2.61 lakh-tonnes a year ago.

“Other stainless steel producers have also incurred losses as they continued to rationalise prices to match with imported products. Ultimately, they produce stainless steel to sell,” said Mathur.

In a letter to Prime Minster Narendra Modi, Muni Lall Gupta, president of Delhi Stainless Steel Trade Association, said, “On account of huge surge in imports, particularly from China at extremely low rates, Indian stainless steel industry’s capacity utilisation has fallen at 55 per cent with fear of further reduction in case urgent steps are not taken.”

On complaints from the industry, the commerce ministry has initiated an investigation into the impact of Chinese imports. Even as the inquiry is ongoing, domestic stainless steel producers have urged the government to levy an anti-dumping duty on Chinese stainless steel.

However, the user segment largely comprising utensil manufacturers, have opposed levying any such duty, given that they now have access to stainless steel at a third of domestic prices. This, in turn, helps them in export markets.

In a letter to the Directorate General of Safeguards, Customs and Central Excise, All India Stainless Steel Industries Association vice-president Anil Agarwal, said “Levy of any safeguard duty will make stainless steel costlier which would make us uncompetitive in exports markets. In addition to a forex loss of Rs 2,500 crore, the safeguard duty levy will also put over 300,000 workers directly employed by utensil industry, at stake.”