Steel import fears divide domestic industry; JSW sees need for protection

As India grapples with increasing steel imports, the country's top domestic producers hold completely divergent views on current protective measures and import scenario of the commodity. While Sajjan Jindal-led JSW Steel sees need for stronger measures to clamp down surging inflows of the alloy, Tata Steel managing director and CEO, T.V. Narendran says, “What the government has done so far is enough.”

The world's third-largest steel producer, India, became a net importer of steel in FY18 as 8.4 million tonne sailed into the country. This is up 15 per cent from the same period last year while during the same period, exports of the commodity dropped 29 per cent. 

Imports of finished products increased by 30 per cent in the April-June quarter from the same period last year. At present, the reference price for hot-rolled is at $485 per tonne while global steel prices have moved above $600 per tonne.

Out of the 8.4-million tonne imported last year, 51 per cent imports were from Free Trade Agreement (FTA) countries such as Japan, Korea and other ASEAN nations where it is zero per cent import duty, said industry officials. They further said mills in these countries have redirected supply after US President Donald Trump slapped an import duty on the commodity earlier this year.

Domestic steel industry currently carries anti-dumping duty on various products including hot-rolled flat products originating in or exported from some countries including China, Japan and South Korea, for five years until August 2021. The duties were imposed in May 2017 to provide long-term protection for Indian steel mills. 

“We are seeing imports of colour coated steel products from ASEAN region, where China is routing the material to India via Vietnam. It gets value added with cheaper coating not meeting BIS (Bureau of Indian Standards),” Seshagiri Rao, managing director and group chief financial officer of JSW Steel said at its earnings conference recently. 

China, the world's largest producer and consumer of steel, had played spoil in 2015-2016 as it dumped excess steel across world markets hurting nearly all geographies including India. It was the impact of these Chinese cheap imports that the government laid a series of protective measures for the domestic steel industry eventually settling for the long-term anti-dumping duty for five years period.

“The way steel imports are rising, the 2016 situation can repeat. There is threat that dumping may happen the way it did in 2015 and 2016,” Rao added.

Meanwhile, Narendran of Tata Steel is at the other end of the spectrum.

“What happened in 2015, I do not see it repeating because China has also taken actions. Chinese environment conditions are stringent now. Our bigger concern was from smaller steel players and not big Chinese players like us in India. Most of the small mills have either aligned themselves with green norms or have had to shut down. What happened in 2015 was last seen in 2003, which is once in 15-year scenario. I do not see it happen anytime soon,” explained Narendran.  

 
Like the US and Europe, who have recently taken protective trade measures, JSW Steel is of the view that Indian steel industry should also enjoy balance, mutual and fair trade which is not the case with FTA countries increasingly dumping steel into India.

“Domestic industry needs safeguard duty or fixed price mechanism from the current reference price mechanism,” said Jayany Acharya, director commercial of JSW Steel. 

Narendran, however, sees price not being so relevant as international prices itself are quite high. "But it is good to have a protection for the downside so to me it allows a good protection. It should not be that somebody else's problem (China, Korea)  is ending at your doorstep. I do not see a need for additional measures. In the current business conditions good companies are profitable and will continue to be,” said Narendran.