Steel cos see limited impact of China's export benefit withdrawal

Despite China’s withdrawal of export benefits, there won’t be a substantial reduction in imports of steel alloys from there, as a major chunk of the imported commodity continues to remain under the rebate umbrella, say industry officials.

However, some impact is likely and the possibility of a 10 per cent fall in imports from China is not ruled out.

Effective January 1, China ended an export-tax rebate on select steel alloys such as sheets, wires and rods that contain boron. Previously, Chinese boron–added steel enjoyed a rebate of 9-13 per cent on the tax incurred, which helped manufacturers export such steel to India.

“There could be just a 10-12 per cent fall in imports from China as a major chunk of steel imports such as (boron contained) cold rolled coils and zinc galvanised sheets are still under the tax rebate umbrella,” said Jayant Acharya, director (commercial and marketing) of JSW Steel.

Export of Chinese steel to India will be impacted only till some time, as Chinese producers will evolve an alternative mechanism, said C S Verma, president of Indian Steel Association.

“It is unlikely that Chinese will allow export volumes to be affected significantly, given that domestic consumption is going down,” said Verma, also chairman of state-owned Steel Authority of India.

Alloys containing other elements are also not included under the rebate cancellation. “We are not sure that this (removal of tax rebate) will reduce imports of Chinese steel into India as other options such as using chromium, still eligible for the rebate, are open. Also, import of nonboron steel into India will continue as it is,” said Shivram Krishnan, chief commercial officer, Essar Steel.

India’s steel imports from China have risen significantly from July, following a slowdown in the latter’s economy. Rising imports are becoming a cause of concern for the domestic industry, which is finding it difficult to sell in the sluggish demand scenario, amid rising input costs.

Usage of other elements instead of boron will increase cost of the steel alloy. But given the tax rebate the Chinese producers enjoy, they are likely to absorb even this hike in input cost, just in case they are unable to pass it on to the customer, said industry officials.

More, even upon usage of elements other than boron, the final cost of imported Chinese steel will still remain lower than domestically available products.

Most industry officials felt the government must take corrective measures urgently on such import.

“It is time for us (India) to guard our shore. The needed tariff barriers, anti-dumping etc need to be brought in place as early as possible to help the domestic industry,” said Acharya of JSW Steel.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel