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Business News/ Companies / People/  Steel consumption will increase in 2016: TV Narendran
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Steel consumption will increase in 2016: TV Narendran

The managing director (India and Southeast Asia) of Tata Steel on the current duty structure of steel and how it affects consumption of the commodity

T.V. Narendra, managing director (India and Southeast Asia), Tata Steel. Premium
T.V. Narendra, managing director (India and Southeast Asia), Tata Steel.

What is the short-term outlook for the steel sector?

Indian steel companies are affected by the oversupply of steel in global markets which has led to a surge in imports from countries like China, Japan and Korea. Over the last one year, steel price has fallen from around $460 a tonne to around $260 in the international markets. Exports from China, Russia, Korea and Japan have surged to all-time highs because of their sluggish domestic demand, excess capacity and competitive currencies. Steel price in India dropped by 40% in the last 18 months compared to a 30% decline in world markets. We, however, believe that domestic consumption will go up in 2016 with initiatives like building smart cities and the government’s renewed focus on infrastructure. Steel consumption could grow by about 7.5% to 87.6 million tonnes (mt) in 2016, from the 81.5 mt consumed in 2015.

Does the recent imposition of minimum import price on steel help producers like Tata Steel?

Globally, this is a tumultuous time for commodities, especially steel. Many countries have taken safeguard measures to reduce the impact of surging imports on their domestic producers. The minimum import price introduced by India is a welcome decision, which could create a level-playing field for domestic steel producers. However, its real impact would be visible only with the passage of time.

Do you think the Make in India campaign is giving a fillip to domestic manufacturing activities?

Certain issues need to be addressed by the government to make the Make in India campaign a success. The manufacturing industry, especially steel, needs to be nurtured by improving factor costs like logistics costs, regulatory costs and cost of capital. We also need to assess the pros and cons of our existing bilateral and multilateral trade agreements to make sure their goals including the strengthening of the domestic industry are achieved.

We need rules to be simple, which are easy to implement at the state level too. Also, steel should be made a priority sector like mining in the Make in India initiative. We have dedicated our 23,000 crore Kalinganagar greenfield steel plant to the state of Odisha and expect to begin commercial production by end of this fiscal.

Are you happy with the current duty structure on steel?

Since last year, the government of India has taken measures that are aimed at creating a level-playing field for the domestic steel industry vis-à-vis imports. Import duty was raised to 15%, a provisional safeguard duty was levied on hot-rolled coils and a minimum import price (MIP) has been imposed on 173 products. Measures like safeguard duty and MIP are only for a period of six months within which the industry will not recover. Since last year, many countries including Thailand and Indonesia have taken steps to ensure that local industries do not suffer because of the flood of exports from China. We need long-term measures like anti-dumping and countervailing duties to come out of the global downturn in the steel industry. (Countervailing duty is levied on imported items at the same rate at which excise duty is levied on domestic production so that there is no duty advantage to importing.)

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ABOUT THE AUTHOR
Gireesh Chandra Prasad
Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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Published: 15 Feb 2016, 01:02 AM IST
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