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Unique strategies needed to do away with imports of defective steel.

Date: 09-10-2018
Subject: Unique strategies needed to do away with imports of defective steel
A calibrated tightening of the monetary policy has led RBI to keep the repo rate unchanged at 6.5% despite the market expectation of a hike. RBI is keeping a close watch on the inflationary trend, economic growth and a medium term target for Consumer Price Index at 4% within a band of +/-2% has been kept. The consumers before the festival season would be happy and private final consumption expenditure for the 3rd quarter is likely to exceed 8.6% growth of first quarter of the current fiscal. The positive impact on sales of houses, passenger cars, two wheelers, consumer appliances along with a plethora of other goods like clothing, leather and gold would benefit all segments of the economy.

The trend of movement of CPI in the recent period makes it clear. The CPI for August 2018 at 3.69% was marginally lower than 4.17% growth in July 2018. Although the housing price indices in August 2018 has moved up by 7.59% and price indices for fuel and light by 8.47%, it is primarily the low rise in growth of food and beverages price indices at only 0.85% that might have influenced RBI decision. Also, a rise in interest rate at this crucial 3rd quarter could have adversely impacted the flow of investment in infrastructure and construction.

Data for half yearly growth of production and consumption of steel is encouraging. The crude steel production in the country at 52.3 MT has risen by 6% in first half (H1) of the current fiscal. India has already dislodged Japan in claiming the second spot after China in the global steel production. The share of the ISPs in total crude steel production is around 62% (including Bhushan Steel) and they have to play a more aggressive role to take the country to reach 300 MT of installed capacity by 2030. The SME sector (other than the likes of Bhushan Steel, Bhushan Steel and Power, Monnet Ispat, Electrosteel Castings, Usha Martin, Visa Steel) has to enhance capacity utilisation significantly to consolidate the production level and then embark on capacity build up. The finished steel availability (including steel made out of ship-breaking/re-rollable scrap, imported semis and for double counting) at 63.8 MT exhibits a growth of 4% in H1. The fall in the growth rate of steel imports is much lower as compared to fall in steel exports. As a result steel consumption at 47.7 MT in H1 is higher by 7.8% as against the consumption level in H1 of the previous year.

It is observed from the breakup of the data that while gross finished steel production of non-alloy grade has gone up by a meagre 2.3%, the major push up has come from finished Alloy and SS grade production that has risen by 26.4% in the period. Revision of data in Alloy and SS segment was long overdue and it is expected that similar corrections (as in HI of FY19) would be made in the previous years to normalise the series. This has compensated the lower growth (6.3%) in the apparent consumption of non-alloy steel with a much higher growth (22.3%) in Alloy and SS steel segment to arrive at 7.8% in the overall steel consumption in the country.

Total steel imports in H1 at 4.6MT are approximately 0.26 MT less than last year. Despite imports from China at 0.8MT is much lower compared to last year, imports from Korea, Japan (RCEP beneficiaries) and China at 3.1 MT comprises of 67.3% share of total imports during the period. Major growth in imports is observed in respect of Structural (0.032 MT), Coated products (0.63MT), Electrical sheets (0.36MT), Tin free steel (0.42MT) and Alloy steel semis (0.14MT). Imports of Melting Scrap at 3.3 MT during the period are nearly 29% more than previous year’s level.

Further, there is a spurt in imports of miscellaneous steel items at (0.9MT) and Ferro Alloys (0.35MT).
Despite repeated pleas by the indigenous steel industry, the imports of Seconds and defective steel are continuing unabated. The Steel User Industry Federation may analyse the reasons for such imports of inferior grades of steel which neutralises the sincere efforts of ministry of steel to promote use of good quality steel by all the segments of our industry resulting in India being the dumping ground of waste and defective products.

During HI of the current fiscal, India has imported 72,000 tonne of Coated products, 60,000 tonne of Tin Plates and 27,000 tonne of Pipes in seconds, defective and waste varieties together worth `630 crore, imported from Belgium, Spain, the US, China, Vietnam and Taiwan. The cheapness of the products is the sole criterion for some of our merchant importers to earn revenues even at the cost of safety and health considerations.

It is also understood that most of these products lose their identity of defective steel when sold in the domestic market. On the other hand, we are not aware of any Indian steel exporters indulging in trading of defective steel to other countries. Can the industry think of any innovative strategy to block these undesirable imports with support from customs authorities under ministry of commerce?

Source: financialexpress.com

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