The Repo Rate Hike: Inflation Gave the Cover, the Rupee Gave the Reason

Dumpwatch: Low Ruble Prices Bringing Russian Steel To India's Shores 

Jan. 26, 2015: First it was China, now India's steel makers face a similar "cheap imports" threat from a neighbor, this time Russia. The depreciation of the Russian ruble against the US dollar has started to have its effect felt in India's steel sector.

Since the last two months, even as steel majors have watched the developments from the sidelines, the steady decline in the ruble's value has led to local players increasingly importing Russian alloy. It is Russia as the flavor of the month, much to the consternation of Indian steel companies, and the situation is not going to improve anytime soon.

To combat the trend, India's steel ministry has proposed an immediate upward revision of import duties on steel products such as long products and hot-rolled coil. The logic is "to safeguard the TMT/rebar industry."

The minister has told the finance ministry to increase import duties on non-alloy long products, HR/CR coil and stainless steel products would face a hike to 10%. The ministry's logic is that excess steel capacity in China and Russia, among other importers, is leading to dumping in India.

A report by Bloomberg quoted JSW Steel's Mumbai-based Senior Vice President, Sharad Mahendra, as saying deals for steel imports from Russia have been struck in the past month and "such purchases will only increase," since Russian companies are able to offer heavy discounts on hot-rolled steel prices.

All of this has raised a question mark about India's domestic steel output. Steel companies have already raised output targets for the year ending March 31, thanks to the government's Make In India campaign. All of that could change now, with such cheap imports coming into the country, analysts say.

Already, in an effort to counter cheap imports, major steel producers have reduced prices on finished products by about 4% in January as metal prices across the world continued to trend downward.

The move is aimed at countering cheaper imports from China and Russia and to arrest a demand slump in the domestic market, industry sources said.

What is now worrying Indian producers is that cheap Russian imports were also threatening to take over a portion of India's traditional export markets in the Middle East such as Iran.

Courtesy: Seeking Alpha