Skip to main content

Safeguard duty might help steel firms lift volumes not prices

By
With the safeguard duty in place, the focus for steel companies will be to improve capacity utilisation rather than raising prices. At best, the prices could increase by Rs.1,000 a tonne over the next 200 days, that is, till the time the duty is applicable. There has been no price increase ever since the safeguard duty was imposed and very little price increase will happen. In absolute terms, it can go up to a maximum of Rs.1,000 a tonne over the next 200 days. There is already too much capacity and demand is not that strong; JSW Steel group chairman and managing director Sajjan Jindal said. JSW Steel happens to be the largest steel maker in the private sector in India.
The industry, however, is treading cautiously on price, for more reasons than one. First, China has already dropped prices by 10 per cent. Landed imports of hot rolled coils are now at $ 297 a tonne compared to an ex- plant price of $ 400 a tonne for the home steel. They are now threatening to reduce prices by another 10 per cent; Jindal said.
China was anyway selling $ 80 below its marginal cost ( the cost added by producing one extra item of a product).
That apart, the user industry, which is anyway upset about the safeguard duty, would not accept any significant price increase. The safeguard duty is for six months, after which the government would take a view on whether there is injury to the industry. If there is, then the duty could be reviewed upwards also up to a period of four years." There is resistance from the user industry. If cheap imports continue to flood the market, then the steel industry will die and the user industries will also not benefit," Jindal said.
The steel industry has already made representations to the government to extend the safeguard duty on the entire value chain of steel products, cold rolled, galvanised, wire rods, TOR steel. The safeguard duty is applicable on import of hot rolled flat products of non- alloy and other alloy steels with a width of 600mm or above.
Cheap imports from China and countries with free trade agreements like Japan and Korea, have been hurting the sector for a while. According to India Ratings and Research, Indias import of iron and steel rose 58 per cent during AprilJune 2015 period, making it the countrys sixth largest import. The sectors contribution to stressed advances stood at 10.2 per cent of the total advances as of December- end 2014 and is among the top five sectors with stressed loans in the system.
Of the four companies where lenders have invoked the strategic debt restructuring, two; Electrosteel Steels and more recently Visa Steel -belong to the steel sector. Right now, the focus for the sector is to improve capacity utilisation, which has been hovering at the 75- 80 per cent levels for the last five years, for better fixed cost absorption leading to an increase in Ebitda ( earnings before interest, taxes, depreciation and amortisation) per tonne. Jindal says it could increase to 86 per cent.
Business Standard, New Delhi, 26th Sept. 2015

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more