Steel imports surged 48.1% in the April-June quarter, and as cheaper imports from China and the former Soviet republics flood the market, pressure has mounted on Indian steel makers to roll back prices even as they face unprecedented demand from infrastructure growth.
According to the Joint Plant Committee (JPC), a public-private partnership that functions as a databank for the steel industry, India imported one million tonnes of steel in the three months through 30 June this year compared with 0.675 million tonnes (mt) in the same period last year.
The growth comes as the International Trade Commission begins hearings this week on levelling import duties on foreign steel makers; American manufacturers contend their Chinese counterparts receive tax breaks and subsidies that all but eliminate global competition.
India’s imports have increased from China, Russia, Ukraine and Kazakhstan, while newer trade partners, such as Iran, Malaysia and Indonesia, are fast emerging as sourcing destinations, industry analysts say.
A government official who closely monitors the steel trade says the imports are of mainly hot-rolled steel, which is seeing demand grow 10-12%. “There is a shortage as there are few producers in the country that make hot-rolled steel,” said the official, who requested anonymity. “Prices have come under pressure and major producers will have to think of reducing prices.”
Overall steel imports in 2006 were already 22% higher than the previous year.
According to preliminary data from trade intelligence company International Business Information Services (IBIS) for this year, hot-rolled steel imports are running at an annual rate of 3.3mt this year—compared with the actual import of 2.3mt last year.
IBIS, which culls data from 19 ports across the country, says China has accounted for 480,000 tonnes of this number in the first quarter, while the Commonwealth of Independent States—the former Soviet Union—accounts for 550,000 tonnes.
The trend worries officials in the steel ministry even as they insist that there is a healthy import-export balance as many new projects face delays and struggle to secure land and iron ore, a raw material for making steel. Total steel export was 4.75mt last year, while imports were 4.1mt.
The average Indian steel price is about $650 (Rs26,325) a tonne. China’s price—including transport costs and insurance—is between $500 and $650 a tonne. Steel coming from Russia and nearby countries ranges between $490 and $500 a tonne. South Korean steel, which is of a higher grade, sells for $700 a tonne. These prices include the $60 per tonne freight charges but not the 5% import duty and Rs200-300 ($5-8) per tonne port handling charge.
Hot-rolled coils, strips and plates are made by eight producers in the country, including Tata Steel Ltd, Steel Authority of India Ltd (SAIL), Essar Steel Ltd and Ispat Industries Ltd. Then 53 cold-rolled manufacturers take that product to make special steel used for high-end construction, the white goods and automotive sectors, and the growing pipes and tubes industry. Many hot-rolled steel players also have cold-rolled mills.
Cold-rolled manufacturers complain that Indian steel prices are too high, calling for a new system of fixing prices on export parity rather than import parity. The steel ministry has set up a steel pricing committee to study the allegations.
The Cold Rolled Steel Manufacturers Association of India says there is a shortage of raw material as Indian producers export hot-rolled materials, charges that integrated steel players deny.
“There is absolutely no shortage. We have a surplus stock of 3.5mt in the country,” said an executive of Essar Steel, who did not wish to be named. “We have to export because there is surplus.”
According to the JPC report, unsold stock of SAIL, which recently cut prices, is about 434,000 tonnes. Tata Steel had about 100,000 tonnes and Rashtriya Ispat Nigam Ltd some 177,000 tonnes.
A SAIL spokesperson credited reduced construction activity during monsoons for the stockpiles, saying they should clear up by next month.
Meanwhile, steel pricing and imports have divided hot- and cold-rolled steel makers, sending each to make a flurry of presentations to various ministries. Cold-rolled makers have been demanding a 5% relief on import duty. However, the Indian Steel Alliance, which is a lobby group for Indian steel makers, accuses cold-rolled makers of taking advantage of Duty Free Imports Authorization law to import and resell raw material in the domestic market.
Many hot-rolled makers see a threat in imports from China, which exports as much as India’s total production of 45mt.
China made 10 times that last year, or over 450mt.
“We have to import because there isn’t enough hot-rolled coils available in the country,” said Ankit Miglani, the commercial director of Uttam Galva Steels Ltd. “To be globally competitive in making finished value-added products, raw material has to be available and that too, at competitive prices.”
But as the gap between demand and supply widens, prices become irrelevant, says Ashutosh Agrawal, executive director of Shabro Intrade Ltd, a metal trading agency. “If the steel projects are getting delayed, demand is not going to get delayed.”