Profiteering or Profitability? What domestic steel industry wants from price hike

Profiteering or Profitability? What domestic steel industry wants from price hike
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Profiteering or Profitability? What domestic steel industry wants from price hike

Profiteering or Profitability? What home metal trade needs from worth hike

steel sectorMetal manufacturing via BF-BOF route makes use of iron ore of 1.65 tonne and coking coal of round 750 kg per tonne of metal.

Metal pricing continues to occupy a centrepiece within the media for the previous few weeks. A wide range of responses and suggestions from end-using sectors, coverage planners, trade associations are filling up the pages. It’s troublesome to take a dispassionate view on the problem from the producers’ or customers’ factors of view. Allow us to take a look at a few of the info.

Metal costs (HRC because the mom product) went up by Rs 16,700 per tonne throughout July to December 2020. These costs went down by Rs 3,100 per tonne throughout January to June 2020. On an extended time perspective, HRC costs throughout January-December 2019 went down by one other Rs 5,500, and subsequently, the web improve in HRC costs stands at solely Rs 8,100 per tonne.

The cyclicity has been very a lot part of the metal trade and for that matter for any commodity pricing. For most of the completed merchandise made out of metal, the drop in metal costs isn’t handed on to finish clients as the identical is taken to compensate the losses incurred by them on earlier events (metal worth rise was one amongst many different elements) and there are compelling causes provided by them to justify this motion.

Metal manufacturing via BF-BOF route makes use of iron ore of 1.65 tonne and coking coal of round 750 kg per tonne of metal. Thus costs of iron ore has a better affect on value of manufacturing of metal.

For metal manufacturing via EAF/IF route, costs of iron ore affect costs of sponge iron which is the first uncooked materials for these producers together with non-coking coal. In case of coking coal (prime laborious low vol) worth rise was minimal, however thermal coal costs went up from $53.46/t in July 2020 to $98.16/t, which influenced home non-coking coal costs. Iron ore costs went up by Rs 2,650 per tonne throughout July-December interval.

In Odisha, the auctioned mines are but to begin manufacturing and there was a decrease manufacturing out of the present mines within the state. Consequently, there’s a provide scarcity of round 25-28 MT of iron ore within the state. This has certainly adversely affected small and medium metal gamers who’re depending on iron ore produced in Odisha. Availability of TMT Bar, wire rods and partially the structural part availability from these segments was a casualty, main to cost rise of these things.

The export of uncooked supplies (particularly pure sources) must be considered individually from export of completed metal objects. In earlier years, nations importing iron ore from India used to export completed metal made out of it to India. Export of iron ore (legally or illegally mined, fines not getting used domestically) has come down through the years. Within the current scenario, additionally it is utilized in making pellets that are exported and including to the issue of non permanent scarcity. Completed metal exports, HRC specifically, is a value-added export and desires not be equated with export of uncooked materials. It takes strenuous efforts and sufficient branding to create and nurture export markets overseas and sudden withdrawal from the market is construed as undependable supply and desires a very long time to recoup. Throughout April to November 2020, India exported 5.1 MT of HRC and imported 0.43 MT of the product, leading to being a internet exporter of 4.6 MT.

In case of stainless HRC and CRC, there was important enhancement of uncooked supplies which aren’t indigenously obtainable. Nickel costs shot up by 40% throughout July to November 2020, molybdenum 27%, copper by 24% and ferrous scrap by practically 45%.

Throughout July to November 2020, the unfold between HRC and CRC went up from Rs 7,610 per tonne to Rs 8,770 per tonne, whereas the unfold between CRC and GPC has come down from Rs 6,730 per tonne to Rs 2,730 per tonne.

There’s a repeated reference to Indian metal trade having been flooded with protecting measures like ADD and safeguard obligation. It’s a reality the HRC (each stainless and non-alloy) have acquired ADD on imports by the Ministry of Commerce which has taken WTO-compliant steps not just for HRC, but in addition for CRC and wire rods. Actions towards dumping not at all ought to be categorised as protecting steps.

The present stage of customs obligation on flat merchandise at 12.5% is decrease in comparison with the duties imposed on HRC imports by superior nations and others. It’s argued that duties could be introduced down to five% to facilitate extra availability as it might not result in larger imports from Japan and South Korea being underneath FTA (nil obligation). However what about imports from Vietnam, Indonesia, Thailand and even Turkey?

We’d be penalising the home trade for capability augmentation in anticipation of a rising home market. The clamour for obligation discount on metal objects should contemplate that Chinese language imports would flood Indian market via altering the origin of supplies and it might engulf CRC and coated merchandise (electro galvanising) along with HRC.

An unprofitable metal trade within the nation has persistently been denied financial institution credit score on the certification of unfavourable class by the credit standing companies. At what level the profitability is termed as profiteering should be benchmarked earlier than it’s accepted as a powerful motive to deprive the trade of the capex for capability augmentation as specified within the NSP of 2017.

(The writer is Former DG, Institute of Metal Growth and Development. Views expressed are private)

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