Indian steelmakers seek greater import protection
GANGADHAR S. PATIL and NIKHIL M. BABU, Contributing writers
BANGALORE, India/DELHI -- The Indian steel industry wants the government to raise further barriers to cheap imports from China, Japan and South Korea but officials appear wary of possible complications from providing additional support.
Indian steelmakers, like their peers around Asia and beyond, are suffering despite low iron ore prices. Citing weakening finances and falling profitability, Standard & Poor's lowered its rating on Tata Steel's debt by a notch in January while Moody's Investors Service did likewise for JSW Steel last month; JSW's revenues declined 23% in the nine months to December.
Steel imports into India rose 75.5% in the fiscal year that ended in March 2015 and were up another 24% in the current fiscal year through January. Chinese imports in particular have more than doubled in volume over the past three years.
Indian steelmakers are hardly alone in calling foul. Their counterparts in the U.S., EU, Indonesia and Turkey have in recent weeks won protective measures from their governments against cheap steel imports; the U.S. Commerce Department, for example, on Mar. 1 announced a 265.8% anti-dumping duty for Chinese cold-rolled steel.
India, the world's third largest steel producer, last month imposed minimum prices for steel imports. This followed four moves last year to impose import duties on various kinds of steel, mostly on anti-dumping grounds.
Though imports have now slowed for four months, the steel industry wants some of the recent temporary measures made permanent and other aid. "We are pursuing our demands of putting further restrictions on imports with the government to help the steel industry," said Sanak Mishra, secretary general of the Indian Steel Association. "We are planning to broaden the spectrum of products covered."
In addition to higher customs duties, the steelmakers hope to win greater export subsidies, help with loans, reduced duties on exports and a requirement that infrastructure projects use domestically produced steel. Although the annual federal budget unveiled Feb. 29 allocates $35 billion for infrastructure, the steel association wants "comprehensive and larger" support and is protesting a proposed doubling of taxes on coal, which powers many foundries. "The tax will put an extra burden of $115 million per year on the industry," Mishra said.
With regard to their heavy debts, the steelmakers would like the government to intervene with banks to slow their repayment schedulesor even get them a moratorium on the payment of interest and principal, as sugar mills received in December 2013. Moody's noted that JSW had to ask creditors for a waiver of some borrowing terms in September and is now seeking their forbearance again; last year, its interest costs exceeded its earnings before payment of interest and tax.
However, the steelmakers face competition for government money and attention, as well as counter-lobbying from some steel users. Makers of engineered products, such as industrial machinery and auto components, want the government to remove the minimum import prices or allow them access to market-rate supplies. "The input cost has gone up 25% in the last two months due to higher steel prices, which makes our engineering goods uncompetitive in international markets," said Pankaj Chadha, vice chairman of the Engineering Export Promotion Council of India.
Aruna Sundararajan, secretary in the Ministry of Steel, acknowledged the competing interests to the Nikkei Asian Review. "We will speak up for the steel industry, but take into consideration others also and do a balancing act," she said, while offering little sympathy for Chadha's constituents. "The sector enjoyed cheap steel for one year and yet the sector didn't grow much. The point is the engineering goods sector depends on global demand and not on steel prices," she said.
While signaling some ambivalence about import restrictions, Sundararajan is hoping Indian steelmakers can get help from Japanese peers. "India has a lot of stressed assets and Japan has the technical know-how and investable capital," she said.
The Ministry of Commerce and Industry is also hesitant about further import barriers, wary of drawing criticism from the World Trade Organization or retaliation from steel exporters. Like its foreign counterparts, the ministry is considering whether China should now be considered as a "market economy"; if it is, that would make it more difficult to impose anti-dumping duties on Chinese imports.
Yet many expect the government will come around to providing more help to steelmakers. Officials have signaled they are considering setting a target to nearly triple production capacity to 300 million tons from 110 million tons within a decade. India produced 91.5 million tons of finished steel in the year to March 2015 against consumption of 77 million tons, but the government is seeking to raise consumption.
Tapan Sen, a Communist Party of India (Marxist) member of the parliamentary consultative committee on steel, said the steel ministry is working on a plan to make some temporary relief measures permanent. "The industry wants a permanent change in provisions relating to anti-dumping duties," he said.
Even if the steel ministry backs the industry's request for help, it could be outweighed in cabinet. Prime Minister Nahendra Modi will have to decide just how much favor this one sector deserves.