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Steel exports to China see transient surge, local firms eye other export markets

Date: 25-06-2020
Subject: Steel exports to China see transient surge, local firms eye other export markets
Despite the balance of steel trade with China for the first-time ever being tilted towards India now, domestic primary steel producers may still find it convenient to lend voice to the ‘boycott China’ chorus as the recent surge in exports may just be a temporary phenomenon, which may die down soon.

While nil duty on imports from countries such as Japan and Korea with which New Delhi has free trade agreements (FTAs) boosting the overall imports, the government had to rein in predatory imports from China with various tariffs and non-tariff measures in the past, mostly on the demands from primary producers.

But, with India becoming a net exporter of steel to China both in April and May, largely because China was producing less of the alloy amidst Covid-19 pandemic, an opportunity for exports cropped up for Indian steel firms like JSPL which grabbed that with both hands to make up for the subdued demand domestically.

However, now JSPL has already started scouting for exports in alternative markets such as Indonesia, the Philippines, Vietnam, Taiwan, Malaysia, Australia and the Middle East.

“Export to China is only a temporary phenomenon, a very rare thing to happen. Since Chinese mills were producing at a lower capacity during the December-March period, there was a short-term supply disruption. Steel mills there are producing at 80-85% capacity in June which is expected to go up to 100% in July. Exports to China have already tapered off,” said JSPL’s managing director VR Sharma.

China contributed 20% to Indian total imports of 7.8 million tonne (MT) steel in 2018-19. In the previous fiscal, its share was 25% to the total imports of 7.5 MT. However, in both the years, China comprised negligible exports from India.

Icra’s Jayanta Roy said “Indian steel makers will have to push for exports, even as it remains a less profitable proposition, to operate the plants at a better utilisation rate as domestic demand remains shallow at least in the first half of the current fiscal as a consequence of lockdown. However, when steel demand within India revives, dependence on exports is likely to come down, in line with earlier trends”.

Requesting anonymity, a steel expert said, “It is only inevitable that China will retaliate if India makes efforts to block Chinese imports into India. That may prove to be counter-productive for the secondary steel producers particularly since they largely depend on imports of semi-finished material for producing finished goods. The cost of projects will also go up, in general”.

Pellet exporters as well as low-grade iron ore exporters will also feel the heat, he said.

Source:- financialexpress.com

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