India shifts defenses against cheap steel imports
time2017/01/20
India shifts defenses against cheap steel imports
NEW DELHI -- India is planning to shift completely from limiting cheap steel imports via the setting of minimum prices to instead using anti-dumping duties, according to Steel Secretary Aruna Sharma.
"The [Minimum Import Price] was initially imposed on 173 steel items, which came down to 66 and now it is down to 19," Sharma said in an interview with the Nikkei Asian Review. She said the remaining items would also be removed from the minimum price framework once the domestic steel industry made a case for that. "As far as hot-rolled coil and wire rods are concerned, we have shifted to anti-dumping measures completely."
The main objective is to target foreign suppliers alleged to be selling steel below cost. Prices of steel bars and coils increased by 10%-20% after the imposition of minimum price last February, according to government data.
India started imposing an anti-dumping duty of $474-$557 a ton on hot-rolled flat products of alloy and non-alloy steel imported from China, Japan, South Korea, Russia, Brazil and Indonesia in August. These six nations account for almost 90% of India's steel imports.
Other categories of steel are expected to be hit with anti-dumping duties amounting to the difference between the producer's current price and approximately $800 a ton. By contrast, minimum import prices have been set at $350 to $700 a ton depending on the category of steel. The shift is expected to lift import prices to a level more on a par with the cost of domestic production.
MIP is calculated as the weighted average international price of a particular category of steel product, while anti-dumping duties are based on an estimate of the cost of production in the exporting country.
Between 2013 and 2016, India's imports of finished steel more than doubled from about 5 million tons to 11 million tons a year. The government claims to have "sufficient evidence" against Japan and other countries of dumping cheap steel, Sharma said. India signed a preferential trade agreement with Japan in 2012.
Rising imports from countries with steel surpluses, such as China, Japan and South Korea, have been a major concern for the Indian industry since September 2014. To ensure a level playing field for domestic steel producers, the Indian government has imposed various measures, including the minimum import price, anti-dumping duties and safeguard duties, which have helped to curb imports and raise prices.
High input costs
Indian domestic steel prices are heavily influenced by high input costs, including for power, and high interest rates. This has been compounded by an increase in the price of coking coal, a key ingredient in steel, from $90 to $133 a ton over the last few months. India currently imports 70% of the coking coal used in domestic production.
"Japan has low power, logistics and capital cost," said Sharma. "But this is not the case here. Our power and credit [costs] are among the highest. We don't subsidize the steel industry. They have to compete with market rates."
In December, Japan brought New Delhi's anti-dumping duties to the World Trade Organization. India says the measures are "100% WTO compliant," and claims it is confident of winning if the dispute reaches the international trade body's disputes settlement process. However, Sharma said Japan's "apprehensions may not be absolute," adding that the government is ready to discuss the issue if there is any "miscommunication or lack of understanding."
Sharma said India is not opposed to imports if they are supplied at fair prices and reflect the true cost of production. "The problem is when the export cost is different from your local cost," said Sharma. "India shouldn't be used for dumping steel." She added: "At present the price of base steel is $474 per ton. Any steel imports below $474 will be subject to scrutiny."
India's anti-import measures have hit sales of Japanese hot-rolled coil, which is used in automobiles and building materials, prompting the Japan Iron and Steel Federation to ask Tokyo to negotiate a settlement with New Delhi. In 2016, Japan exported hot-rolled coil worth about 58.9 billion yen ($522 million) to India.
Chinese overcapacity
The role of Chinese overcapacity in triggering the rising wave of protectionism in the steel sector was discussed at the 2016 summits of both the G7 and G20 groups of large economies. China, the world's biggest steel producer with installed capacity of 1.2 billion tons, produced 803.8 million tons in 2015, followed by Japan with 105.2 million tons and India with 89.6 million tons.
However, Chinese efforts to reduce overcapacity have so far had little impact, with global output rising by at least 5% in 2016. The slow pace of Chinese capacity reduction has serious implications for non-Chinese steelmakers because high levels of production in China exert downward pressure on global prices.
India's steel industry is counting on a sharp rise in the country's low level of per capita consumption, currently 61kg a year compared with an international average of 208kg. "The first benchmark will be 120 [kilograms per capita], which should happen early because India is a country that has to invest a lot in steel-based infrastructure and automobiles," said Sharma.
Indian production grew by 5.9% in the first nine months of 2016, compared with the same period a year earlier, while exports rose by 35% and imports fell by 37%. Tata Steel's share price has more than doubled since minimum import prices were introduced.
Sharma said India's safeguard policies were designed to stop dumping, but not to protect inefficient producers. "We are constantly working to promote steel-based infrastructure both in rural and urban India," she said. "It is important to increase steel consumption, for which there is a huge scope."