In-Focus Cheap Imports Haunt

Indian Stainless
Steel Industry
P erturbed by cheap import from China,
Indian stainless steel industry has
urged the government to raise import duty
and protect domestic mills from closure.
These were being dumped in India at the
cost of domestic industry, it said, adding
that the share of Chinese flat stainless
steel products into the country had risen to
30%. In a partial relief to domestic industry
which has been reeling under severe
under-utilisation of capacity, the
government increased import duty on flat-
rolled products from 5 per cent to 7.5%.
Presenting the Union Budget, Finance
Minister Arun Jaitley said this was done to
The Industry provide an impetus to domestic stainless
Stainless steel accounts for only 2.4% of global crude steel production. In the case steel industry.
of India, the latest available estimate puts the corresponding figure at 3.6% for the year
2012-13. This gives the understanding that stainless steel consumption growth rates
have been higher than those for carbon steel, it is expected that slowly the share of
stainless steel in total consumption of steel will rise to take a share of 5 per cent in total
steel production. The forecast for other alloy steel is that their consumption will come
to 7% of the total consumption of steel. It may be noted that the entire demand and
production of stainless and alloy steel are included in the overall estimates of demand
and production of steel as mentioned above. India's stainless steel production stands at
around 3.3 million tonnes for the last several years. The apex industry trade body
Indian Stainless Steel Development Authority (ISSDA) estimates India's stainless
steel consumption to grow to 3.5 million tonnes by 2015. As a result of cheaper imports
and a slowdown in the economy, domestic manufacturers have struggled. For
example, Jindal Stainless Ltd (JSL), one of the largest stainless steel manufacturers in
the country has accumulated losses of Rs 2,314.72 crore in fiscal years 2013-14, 2012-
13 and 2011-12. The last time the company had reported an annual net profit was in the
2010-11 fiscal when it had a profit of Rs 318.34 crore. The fiscal 2013-14 has been
particularly bad for JSL with over Rs 1,200 crore being eroded from its net worth. As
on March 31, 2014, the company's consolidated net worth stood at Rs 61.97 crore as
against Rs 1,339.56 crore on March 31, 2013.
On the contrary, Indian companies have made a huge investment of over Rs.25,000
crore in the last few years and are reporting losses and that this may result in non-
performing assets (NPA) due to the high import of stainless steel from China. For April
2014, stainless steel exports data indicate an increase of 22% during April to 3.9 lakh
tonnes.
"Although India is the world's second-largest consumer and third-largest producer
of stainless steel, the nation's average per capita consumption of stainless steel is only
about 2 kilos, whereas the global average is 5 kgs. To address these challenges and
meet development goals, an import duty hike is really needed to create a level-playing
field for domestic steel producers because China uses dumping and other unfair trade

44 October 2014
practices to enter foreign markets”, said ISSDA
president NC Mathur.
The problem of trade imbalance is
especially pronounced in the industry where
China now accounts for almost 50 per cent of
total stainless steel global production in the
world.
Import Surge
The domestic stainless industry has been
facing a threat in the form of a sudden and
immense surge in imports from various
countries, especially China, primarily because
of the current import duty which is considered
to be on the lower side in comparison to other
nations. China has an average customs duty of
10% and Brazil, 14%. Taking opportunity of
lower customs duty, imports from these
countries were on the rise in recent times.
India's imports of stainless steel surged to
307,226 tonnes in 2013-14 from 239,136
tonnes in 2011-12, reporting a growth of nearly
30 per cent.
Import of stainless steel surged despite the
fact that the Indian economy being on the slow
growth path. With the manufacturing and
infrastructure sectors are currently passing
through a major slowdown, restricting thereby
import of stainless steel. The industry fears that
import can surge manifold with the onset of a
revival on manufacturing and infrastructure
sectors.
Going Tough
The stainless steel industry in India is
passing through a huge strain on account of
cheap imports and unfavourable duty structure,
as a result the capacity utilization of the
domestic industry has come down to around
40%. Moreover, volatility in raw material
prices and fluctuating exchange rates increases
the raw material cost for domestic
manufacturers besides causing uncertainty in
business. Further, import duty of 2.5% on pure
nickel, ferro nickel, mild steel and stainless
steel scrap is also impacting the profitability /
operations of domestic stainless steel industry
severely.
For the past four years, the global economy
has slowed down considerably; as a result
growth in India has also been slow. Despite, the
overall global stainless steel production grew
by 5.2% in 2012-13 to reach a record high of
35.4 million metric tonne (MT) vis-Ã -vis
2011-12 largely due to China. And rest of the
world showed a negative growth, mainly due to
destocking.
India, however showed a marginal growth
vis-a-vis 2011-12. Current per capita usage of
stainless steel in India is little over 2 kg which is
one of the lowest among the other developing
economies and all out efforts are being made
for growth of this industry. We estimate global
growth in stainless steel demand to be between
5-6%, whereas in India we are making serious
efforts to enhance this growth to 8-9%, but for
this the government needs to bring the focus
back on infrastructure development.
Traditionally, stainless steel has found
acceptance and usage in the kitchenware,
tableware, household articles, nuclear power,
chemical industry, petrochemical and all other
process industries, automotive, railway and
transportation and architecture, building and
construction.
Having realized the great value stainless
steel brings to the table, more and more sectors
are now openly experimenting with stainless
45 October 2014
steel such as, mints, plumbing, overhead water
tanks, modular kitchens, milk cans, solar
power, gas cylinder etc,. But, architecture,
building & construction and automotive,
railway & transport sectors will continue to be
the key demand drivers for stainless steel.
Industry Demand
Domestic stainless steel makers have urged
the government to raise import duty at least to
15% from the current 7.5% in order to protect
local industry from cheap imports. With China
having surplus capacity, the Indian stainless
steel producers fear the cheap import to
continue in future as well.
The industry also demanded removal of the
basic customs duty on key raw materials and on
scraps to ensure the domestic stainless steel
industry can manifest itself as a global
competitor.
India now ranks as the third largest
consumer and producer of stainless steel.
Industry sources said country's stainless steel
consumption was expected to grow at 8-9% per
annum annually to reach around 3.5 million
tonnes by 2015.
Indian manufacturers depend on imported
coking coal and suffer from borrowing costs in
the region of 12 to 13%, which is impacting
their price competitiveness against Chinese
imports.
China's capacity of stainless steel has
grown at a radical pace, outgrowing its demand
and resulting in excess production. It is this
excess produce that finds its way to Indian
markets creating an imbalance and destroying
the level playing field. In 2013 alone, China has
created an oversupply of 1.84 million tonnes.