Steel pricing continues to occupy a centrepiece in the media for the final handful of weeks. A range of responses and feedback from finish-making use of sectors, policy planners, business associations are filling up the pages. It is tricky to take a dispassionate view on the concern from the producers’ or users’ points of view. Let us appear at some of the information.
Steel rates (HRC as the mother item) went up by Rs 16,700 per tonne in the course of July to December 2020. These rates went down by Rs 3,one hundred per tonne in the course of January to June 2020. On a longer time viewpoint, HRC rates in the course of January-December 2019 went down by a different Rs 5,500, and for that reason, the net boost in HRC rates stands at only Rs 8,one hundred per tonne.
The cyclicity has been incredibly a lot a portion of the steel business and for that matter for any commodity pricing. For a lot of of the completed goods created out of steel, the drop in steel rates is not passed on to finish shoppers as the very same is taken to compensate the losses incurred by them on preceding occasions (steel price tag rise was 1 amongst a lot of other aspects) and there are compelling motives provided by them to justify this action.
Steel production by way of BF-BOF route makes use of iron ore of 1.65 tonne and coking coal of about 750 kg per tonne of steel. Thus rates of iron ore has a greater effect on price of production of steel.
For steel production by way of EAF/IF route, rates of iron ore effect rates of sponge iron which is the principal raw material for these producers along with non-coking coal. In case of coking coal (prime difficult low vol) price tag rise was minimal, but thermal coal rates went up from $53.46/t in July 2020 to $98.16/t, which influenced domestic non-coking coal rates. Iron ore rates went up by Rs 2,650 per tonne in the course of July-December period.
In Odisha, the auctioned mines are however to commence production and there has been a reduce production out of the current mines in the state. As a outcome, there is a provide shortage of about 25-28 MT of iron ore in the state. This has certainly adversely impacted modest and medium steel players who are dependent on iron ore produced in Odisha. Availability of TMT Bar, wire rods and partially the structural section availability from these segments was a casualty, top to price tag rise of these products.
The export of raw components (specifically all-natural sources) demands to be viewed separately from export of completed steel products. In earlier years, nations importing iron ore from India used to export completed steel created out of it to India. Export of iron ore (legally or illegally mined, fines not getting applied domestically) has come down more than the years. In the present predicament, it is also applied in producing pellets which are exported and adding to the issue of short-term shortage. Finished steel exports, HRC in distinct, is a worth-added export and demands not be equated with export of raw material. It requires strenuous efforts and sufficient branding to generate and nurture export markets abroad and sudden withdrawal from the industry is construed as undependable supply and demands a lengthy time to recoup. During April to November 2020, India exported 5.1 MT of HRC and imported .43 MT of the item, resulting in getting a net exporter of 4.6 MT.
In case of stainless HRC and CRC, there was considerable enhancement of raw components which are not indigenously offered. Nickel rates shot up by 40% in the course of July to November 2020, molybdenum 27%, copper by 24% and ferrous scrap by practically 45%.
During July to November 2020, the spread in between HRC and CRC went up from Rs 7,610 per tonne to Rs 8,770 per tonne, when the spread in between CRC and GPC has come down from Rs 6,730 per tonne to Rs 2,730 per tonne.
There is a repeated reference to Indian steel business possessing been flooded with protective measures like ADD and safeguard duty. It is a truth the HRC (each stainless and non-alloy) have received ADD on imports by the Ministry of Commerce which has taken WTO-compliant actions not only for HRC, but also for CRC and wire rods. Actions against dumping below no situations should really be categorised as protective actions.
The existing level of customs duty on flat goods at 12.5% is reduce compared to the duties imposed on HRC imports by sophisticated nations and other individuals. It is argued that duties can be brought down to 5% to facilitate more availability as it would not lead to greater imports from Japan and South Korea getting below FTA (nil duty). But what about imports from Vietnam, Indonesia, Thailand and even Turkey?
We would be penalising the domestic business for capacity augmentation in anticipation of a increasing domestic industry. The clamour for duty reduction on steel products have to contemplate that Chinese imports would flood Indian industry by way of altering the origin of components and it would engulf CRC and coated goods (electro galvanising) in addition to HRC.
An unprofitable steel business in the nation has regularly been denied bank credit on the certification of unfavorable category by the credit rating agencies. At what point the profitability is termed as profiteering have to be benchmarked prior to it is accepted as a sturdy explanation to deprive the business of the capex for capacity augmentation as specified in the NSP of 2017.
(The author is Former DG, Institute of Steel Development and Growth. Views expressed are individual)