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Steel cost of engineering exporters to drop

Date: 12-06-2019
Subject: Steel cost of engineering exporters to drop
In a huge relief to engineering goods exporters and others that use steel to manufacture products, steel-makers like JSW, SAIL and Tata Steel have agreed to charge these bulk consumers the same price for the raw material at which they are exporting it to other countries.

Engineering goods exporters complain that local steel producers are charging them 15-20% more than the price at which the latter are shipping out to other countries, making their products uncompetitive in the global market. However, steel-makers contest such a claim, saying the premium could at best be 5%.

The move comes at a time when an escalating global trade war between the US and China has reinforced fears of steel dumping by China.

At a crucial meeting on Tuesday — attended by commerce and industry minister Piyush Goyal , steel minister Dharmendra Pradhan, top executives of steel companies, engineering goods exporters and others — it was decided that steel will be made available at this rate to only those bulk consumers who would export finished goods after value addition, and not sell these in the domestic market, said three sources who attended the meeting. The steel will be made available to these bulk consumers under an advance licence scheme.

Engineering goods exports — which account for around a fourth of India’s merchandise export basket — contracted by 7% year-on-year in April to $6.7 billion, compared to a 0.6% rise in the country’s overall goods exports. In FY19, engineering goods exports grew just 6.3%, against a 9% rise in the overall merchandise exports.

The objective behind the latest move is to ensure that engineering goods exports double in the next five years (from around $81 billion in FY19) and touch $200 billion by 2030.

Commenting on the move, Engineering Export Promotion Council of India (EEPC India) chairman Ravi P Sehgal told FE: “If the steel makers are exporting at a certain price, why should they charge much higher price to domestic consumers who are using the raw materials for exporting finished goods? This discrimination against domestic consumers like us must end. It’s a huge relief ensured by the government’s timely intervention.” Against the global price of $450-500 per tonne, for instance, prices of a particular steel variety in the domestic market were ruling at $600 per tonne.

The domestic primary steel producers had enjoyed the official protection against cheaper imports since 2016, although such safeguard measures have been either withdrawn or become ineffective due to a spike in global steel prices beyond the reference price (below which an anti-dumping duty kicks in).

For its part, the steel industry on Tuesday demanded that a 25% safeguard duty on ad valorem basis be imposed on six product categories, including semis, flats, longs, pipes and tubes to curb imports. It also demanded that steel should be kept out of the purview of the free trade agreement (FTA).

Sources present in the meeting said, the commerce ministry has assured the industry to ‘look at the proposal’.

Arguing that since the current anti-dumping duties are in the form of reference price (which essentially means that imports above reference price attracts no duty), the industry urged for a revision in the reference price. It said without the upward revision, anti-dumping duty has become ineffective.

During the anti-dumping investigation period between July, 2015 and December, 2015, reference price was fixed taking into consideration the prevalent input costs.

However, since then the prices of both key raw materials — iron ore and coking coal — have increased significantly resulting in a substantial increase in the international prices.

India has become a net importer of steel in 2018-19 after a gap of three years. India imported 7.8 million tonne of steel in 2018-19 against exports of 6.3 million tonne.

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Source: financialexpress.com

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