By Sohrab Darabshaw
It's a problem that's dogged almost all the major economies as well as developing nations - the dilemma of cheap steel imports. Steelmakers in the U.S. have, in the past, not only cried foul at the World Trade Organization but also imposed steep anti-dumping duties on cheap imports from China, Korea and India making their way into the U.S. market, thus further depriving an already stressed out market.
A few days ago, as reported by MetalMiner, seven EU nations asked the European Commission to intervene to stop cheap imports of steel, particularly from China and Russia.
India has imposed a minimum import price on most steel products. Source Adobe Stock/Jovanning.
In India, a market where steel consumption continues to grow bucking global trends, the situation is no different. So, finally giving into the loud protests by domestic steel companies against cheap imports, the Indian government recently imposed a minimum import price (MIP) ranging from $341 to $752 per metric ton on 173 steel products as a "temporary" measure.
Minimum Import Prices
The MIP conditions are valid for six months from the date of the notification or until further orders, whichever is earlier. The MIP, though, will not be applicable on imports under the advance authorization scheme and high-grade pipes used for pipeline transportation systems in the petroleum and natural gas industry are exempt.
The move seems to have gone down well with a majority of the steel trade bodies and a large section of India's steel industry, but some have called it simply a band-aid for the hemorrhaging steel sector.
India's domestic steel production between April-January 2016 dropped 1.8 % to 75.66 million mt, while imports rose 24.1% to 9.3 mmt. Consumption grew 4.2% to 65.91 mmt. For domestic steelmakers, apart from the MIP, the import duty has also been raised to 10% for flat products and 7.5% for long products.
The rationale behind the MIP was explained by Steel Secretary Aruna Sundararajan, in an interview with The Economic Times. She said the move would give India's steel industry much-needed breathing space to get healthy.
Over the last couple of years, India had seen a spurt in steel imports, leading to a decline in prices. According to the Steel Secretary, India had over 400 mmt of surplus steel. All that surplus has put the domestic steel industry into distress.
While imposing the MIP, the Indian government also took care to ensure that downstream users were not affected. That's why certain categories of steel - required by end-user industries - not manufactured in India, were exempted.
The government's decision to impose MIP will, however, reduce the benefit of lower commodity prices for automobile companies, according to many experts. Also, according to the engineering goods exporters' body, EEPC India, the MIP will lead to further erosion in engineering exports. It has thus sought from the government a compensatory mechanism to make up for the increased raw material price (about 10%) for the distressed exporters, mostly in the small and medium-sized enterprises segments.
The Indian government has dubbed the MIP an "emergency provision." In the next six months, it will be looking at anti-dumping duties and moving towards more stable, longer-term measures. It will also be keeping a close watch on imports after the MIP, as well as the response of domestic steel companies and consumers.