Double whammy for steel firms: Rising imports, dipping exports
[Editor: The Steel manufactures have been shouting since the last few months to give protection to the domestic steel sector, but all these have fallen into the deaf ears of our Prime Minister Narendra Modi, who is now busy, to give a treat to Barrack Hussein Obama (with "Poor Tax Payers' Money"). This report was published on 11 January, 2015, but still the government is take action.
It is pertinent to note that, the single-most important factor which affected steel companies in 2014 was iron ore shortage, which forced India’s top two private steel companies—Tata Steel Ltd and JSW Steel Ltd—to import the raw material.
Tata Steel’s captive ore supplies were hit by the mining ban in Jharkhand and Odisha, while JSW Steel was affected by the inability of miners in Karnataka to raise output to 30 million tonnes per annum (mtpa) permitted by the Supreme Court. It is important to note that Tata Steel imported iron ore for the first time. The steel index component in the index of industrial production (IIP) is signalling a weak trend since September; but it seems the ruling NDA Government is not bothered.
It is ironical that, as a country, we have to import iron ore despite having some of the best iron ore reserves in the world. India is still to have policy clarity and stability, especially on mine-lease renewals and forest clearances, which are key to the growth of domestic steel industry. The point which I want to stress is that: The UPA and the NDA have already destroyed the "Gems and Jewelry Sector" and now Steel could be another one on the anvil; if immediate steps are not taken]
It is pertinent to note that, the single-most important factor which affected steel companies in 2014 was iron ore shortage, which forced India’s top two private steel companies—Tata Steel Ltd and JSW Steel Ltd—to import the raw material.
Tata Steel’s captive ore supplies were hit by the mining ban in Jharkhand and Odisha, while JSW Steel was affected by the inability of miners in Karnataka to raise output to 30 million tonnes per annum (mtpa) permitted by the Supreme Court. It is important to note that Tata Steel imported iron ore for the first time. The steel index component in the index of industrial production (IIP) is signalling a weak trend since September; but it seems the ruling NDA Government is not bothered.
It is ironical that, as a country, we have to import iron ore despite having some of the best iron ore reserves in the world. India is still to have policy clarity and stability, especially on mine-lease renewals and forest clearances, which are key to the growth of domestic steel industry. The point which I want to stress is that: The UPA and the NDA have already destroyed the "Gems and Jewelry Sector" and now Steel could be another one on the anvil; if immediate steps are not taken]
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| Photo: Top News |
Describing the 58% growth in imports and 6.6% dip in exports during the April-December period as "very harsh," one private sector steel maker attributed the situation to higher input costs.
"Despite a literal crash in iron ore prices globally, we are deprived of the benefit domestically. At the same time, we are to pay 2.5% import duty on coking coal which India does not produce. Due to this, Indian steel makers are loosing out to their global peers.
With tepid growth in domestic consumption and large scale of imports, we are not in a position to raise price even if it was an absolute necessity. This is eating out our margins," said the spokesperson.
India, fourth largest steel maker in the world, imported 6.51 million tonnes steel during the April-December period of the current fiscal. Exports, on the other hand, declined to 4.06 MT during the period.
Steel imports are galloping because there is hardly any difference between the landed and the domestic costs of the alloy, forcing steel makers to roll over their price for two months in a row, said another source.
"Considering India's 100 million tonnes installed steel production capacity and a little over four million tonnes of exports, imports should not have been much a headache; but the problem is our consumption has not been growing in the desired proportion," he said.
According to Joint Plant Committee (JPC), a unit of the Steel Ministry, India's steel consumption grew by just 1.4% during April-December period of current fiscal at 55.24 million tonnes compared to 54.507 MT during the corresponding period of the last fiscal.
"The slow year-on-year cumulative growth numbers appear to reflect the lingering effect of economic slowdown and is further depressed by declining growth rate in production for sale in December 2014 as compared to same period of last year," JPC recently said.
A senior executive of another private sector firm said the government must try to contain the free-flowing imports of steel and take steps to boost domestic consumption.
Steel in India is coming in big volumes from China, Japan and Korea. While exports is a compulsion for China because of its huge domestic supply-demand mismatch; Japan and Korea are taking advantage of the free trade agreements with India.
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