India-China stainless steel import tax.

The Indian government has introduced a 20 per cent import tax on certain varieties of stainless steel from China, in a move to protect local industry.

The safeguard duty will be in place for 200 days and applies to “Hot Rolled Flat Products of Stainless Steel-304 ” and all grades containing Chromium or with a Nickel content over 6 per cent.

Sanjay Jain, a senior vice-president at Motilal Oswal Securities, told beyondbrics: “India is very competitive in 200 series steel but not 300 series. This 304 series metal is of superior quality and more expensive, which means it is only applied where necessary and the new duty won’t affect the big Indian steel companies very much.”

So it is that shares in Indian steel companies rose on Monday, when the notification was posted on the ministry’s website, but have declined since then as the limited impact of the new measure was recognised.

Shares in Steel Authority of India were up 4.5 per cent on Monday but then fell 2.3 per cent in the next session – they dropped 1.8 per cent again on Wednesday to close at Rs95.50. Similarly, shares in Tata Steel gained 1.7 per cent on Monday, before losing the same in the following day’s trading – the stock lost 2.5 per cent on Wednesday to Rs 422.30.

The notification says that the new duty aims to protect the steel industry, which contributes nearly 2 per cent of India’s GDP and employs more than half a million people:

Jain mentions that this is unusual protectionism from the Indian government. But concern for the steel industry is understandable.

Despite being the world’s fourth largest producer of crude steel, India has recently become a net importer; imports of flat products – which the new customs duty applies to – have grown in particular. Steel production increased by an average 7 per cent per year in India between 2005-06 and 2010-11 while consumption has grown at 9.6 per cent per year over the past six years.

The singling out of China isn’t pure sinophobia either. Chinese steel imports now make up a third of India’s steel imports in value terms.

Source : blogs.ft.com