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How Chinese steel is undergirding India’s rapid growth story


India has continued anti-dumping duty of $613 per tonne on flat-base steel wheels from China in a decision announced on Monday. The duty on steel wheels was imposed in 2018 and now the government has continued the imposition for another five years. The duty is based on the recommendation by the Directorate General of Trade Remedies (DGTR), the investigation arm of the Ministry of Commerce and Industry to guard domestic players against cheap imports from China. India’s steel producers expect a boost to local manufacturing and a fall in prices due to the duty.

This steel product, constituting a relatively small segment, is used in tubed tyre applications in commercial vehicles. With a relatively smaller market size with just 0.75 million tonnes of steel wheels being produced annually in India, according to an industry executive, it is set to be lucrative for steel producers to get into the segment, and more competition will drive down domestic prices. A Zhejiang-based steel trader told Reuters that the overall impact on the Chinese export market will be “relatively limited” as shipments to India account for “a very small portion of the total exports.”

With a growing appetite for steel, given India’s focus on capital expenditure as it continues its breathless infrastructure-building pace, the country is gorging on China-imported steel, just as the Indian steel industry is asking the government for duties on major Chinese steel products.

India’s China dependence
During April-July, China was the second biggest steel exporter to India, after South Korea, selling 0.6 million metric tons, up 62% from the same period a year earlier. In all, India imported 2 million metric tons of finished steel in the period, the highest since 2020 and up 23% from a year earlier. India’s finished steel purchases from China touched a six-year high in the first two months of the fiscal year.
China, the world’s top steel producer, exported mostly cold-rolled coil or sheets to India, used in the automobile, white goods and consumer durable sectors. India also imported electrical sheets and pipes from China.Local concerns
The domestic steel industry has drawn the government’s attention to imports from South Korea and China, saying the consequent lowering of prices is hurting local producers. “A sharp rise in the imports of finished steel was recorded in the first quarter of the current financial year. The surge in imports, driven by countries with Free Trade Agreements (FTAs), as well as China, is eating into domestic demand,” Ranjan Dhar, chief marketing officer, ArcelorMittal Nippon Steel, told ET last month.

“Domestic steel prices had climbed up to Rs 65,000 per tonne in the first quarter of the previous fiscal. These have now come down to Rs 56,000 per tonne. But despite the fall, imported steel from Vietnam, Japan, China and Russia is trading at Rs 54,000 per tonne, and is expected to come down further next month,” said Vedant Goel, managing director at Neo Mega Steel, a trading company.

Indian traders were scooping up Chinese steel at a deep discount, spooking Indian producers ahead of a seasonal pick up in domestic demand, Reuters reported in July, based on information from industry officials and analysts. Lured by discounts of $30 to $50 a tonne on hot-rolled and cold-rolled products, Indian buyers are signing a flurry of import deals. Domestic industrial activity is set to pick up over the next two months after the monsoon rains recede.

“The Chinese are offering discounts because other markets are not doing well and we are seeing good growth in the Indian automobile and construction sectors,” said Snehdeep Bohra, a director at Fitch Ratings in India, told Reuters.

Cheaper steel purchases from China could further eat into the market share of Indian suppliers, already hit by imports of Chinese electrical steel used in power infrastructure and electric motors, according to industry officials and analysts.

India’s Chinese steel dilemma

Despite Chinese steel flooding the Indian market and a recommendation from trade officials and lobbying from local steel manufacturers, the government may not impose a countervailing duty on select steel imports, a source had told Reuters in July. In a rare move the government was not willing to impose 18.95% CVD on certain flat rolled steel products imported from China for five years.

The government aims to protect steel consuming firms from higher prices even though it could hurt local steel manufacturers, a source said Reuters. “Imposing CVD protects manufacturers, but users end up paying a higher cost,” the official, who did not want to be named because a final decision had not been made public, told Reuters. “So you have to balance the interest between users and manufacturers.”

In April, DGTR had recommended CVD on some stainless steel flat products. CVD by India on such Chinese products was removed in February last year and over 170 Indian steel companies including Jindal Stainless Ltd and Steel Authority of India have backed a petition to re-impose CVD for another five years, as per the DGTR report. The official said that imposing CVD would hurt small and medium consuming companies while benefiting a few large conglomerates at a time when the economic recovery in India was rapid but uneven.

Icra revised its baseline steel price predictions for FY2024 in May, forecasting an average year-on-year decrease of 4-5% in domestic HRC prices. It had projected a marginal year-on-year increase of 1-2% previously.

China’s problem of plenty
China is set to export the most steel this year since 2016, as the weakening yuan and competitive prices help the world’s biggest producer offload surplus metal due to weak demand at home.

Competition from China has resulted in India’s steel exports falling by a third, though local producers will have a limited impact given robust sales in the domestic markets. India exported 780,000 tonnes of finished steel and billets a month on average between January and July, as against an average of 1.08 million tonnes a year earlier, data from market intelligence platform SteelMint show.

China, the world’s biggest producer of steel, is reeling from a demand slowdown due to slow Covid recovery as well as slowing down of the real estate sector. It has created a huge steel production capacity and now it needs to dump its steel at cheap rates in other countries. Due to excess supply and low demand and prices, Chinese steelmakers are struggling with declines in earnings.

The steel glut has forced the government to push for consolidation of the sector and limit production. However, cutting down capacity is not easy as the government cannot afford steep falls in tax revenue and employment.


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