The recent government notification to ease steel import norms will not only increase inward shipment of the metal, but also add to woes of domestic firms battling demand slowdown, industry experts said on Monday. The industry called for an urgent review of the decision, saying the quality of domestic steel is of global standards.
"The government's latest move will further increase import of steel, resulting in idling of local production capacity, further adding to the woes of ballooning current account deficit," JSW Steel Joint MD (rpt) Joint MD and Group Chief Financial Officer Seshagiri Rao told PTI in an email.
"The long-term implication is dangerous, as the domestic industry is facing demand slowdown and domestic surplus will further go up," he added. In its August 7 order, the government had exempted steel and steel products imported for mega industrial projects with investment over Rs 1,000 crore from the quality control regulation known as the 'Steel and steel products (quality control) second order of 2012'.
The government's move has caused consternation within domestic steel companies about import of a lot of inferior quality steel products into the country. "The main worry is that apart from plates, a lot of plain-vanilla low-grade structural steel like rebars and TMT bars will also get into the country. It will strike at the very heart of our steel industry where currently a lot of idle capacity exists. The industry needs a curb on imports to stop dumping," Rao added.
Essar Steel India Chief Commercial Officer H Shivramkrishnan said, "The steel industry is already hit from all sides, including high input cost, cheap FTA imports, proposed reduction in export duty on iron ore and the weakening domestic demand."
"The new rule has the potential to jeopardise the domestic steel industry due to threat of cheap imports from countries like Ukraine and China and would add to the woes of the already struggling industry besides adding to the high CAD".
He also termed the government move as surprising and retrograde. The domestic steel industry, with around 90 million tonne capacity, is running at 70-80 per cent utilisation level in recent times, on the back of subdued demand owing to slowdown. It will impact government's own plan to expand the domestic capacity, which it had recently pegged at 200 MT over the next decade.
The country imported 7.87 MT steel last fiscal, which was an all-time high. Analysts pointed out that the likely rise in imports will not bring down steel prices, saying, if at all there is some price impact, it will be minimal. "I think, as far as price is concerned, there will not be much of impact as the domestic steel prices are at par with landed cost of imported steel," Senior Analyst (Metals and Mining) at Angel Broking Bhavesh Chavan said.
Chavan, however, added that in a low demand scenario, any easing of import norms will have some impact on the capacity utilisation front.
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