Stainless steel makers cut prices by 7-10% to match imports, call for tariffs

Stung by cheap imports from ASEAN and free trade agreement (FTA) countries, stainless steel manufacturers have cut prices to 7-10% below the cost of production.

Stainless steel imports have witnessed a significant increase in the first nine months period between April – December of the current financial year. Against 307,266 tonnes in all of FY2013-14, total import of stainless steel in the first nine months of the current fiscal has been 423,894 tonnes, an increase of almost 38%. Another 100,000-150,000 tonnes of further imports in the last quarter of FY-2015 cannot be ruled out, according to industry experts.

Of the total imports so far, China accounts for the lion’s share of almost 35%. Imports have also increased from countries like Malaysia, Thailand and Vietnam where India has signed an FTA to import stainless steel duty free with a mandatory value addition of 35%.

“There is no room for 35 per cent value addition in stainless steel. Mills in Vietnam and elsewhere are importing hot rolled sheet to convert into cold rolled which entails not more than 10-15 per cent of value addition. Thus duty free import at the cost of domestic mills does not make any sense,” said N C Mathur, President, Indian Stainless Steel Development Association (ISSDA), and an advisor to Jindal Stainless Ltd.

India’s stainless steel industry has invested heavily on capacity addition over the last four years to over 5 million tonnes from 3.5 million tonnes. 

China’s stainless steel industry, meanwhile, has 7 million tonnes of capacity – largely with government support – since 2010 to 17 million tonnes now. However, with demand increasing to 14.6 million tonnes, it still has a surplus of more than 2.5 MT. While raw materials like ferro chrome are available at low prices, the government has also subsidised electricity and interest on working capital loan used for stainless steel manufacturing. This, in turn, makes the Chinese cost of production 30-40% cheaper than India. 

India’s largest stainless steel producer Jindal Stainless reported a loss of Rs 255 crore in the second quarter ended September 2014 on revenue of Rs 3,304 crore. During Q2, stainless steel sales volume increased by around 1% to 2.64 lakh tonnes from 2.61 lakh tonnes a year ago.

“Other stainless steel producers have also incurred losses as they continued to rationalise prices to match with imported products. Ultimately, they produce stainless steel to sell,” said Mathur.

In a letter to Prime Minster Narendra Modi, Muni Lall Gupta, president of Delhi Stainless Steel Trade Association, said, “On account of huge surge in imports particularly from China at extremely low rates, Indian stainless steel industry’s capacity utilization has fallen at 55 per cent with fear of further reduction in case urgent steps are not taken.”

On complaints from the industry, the Commerce Ministry has initiated an investigation into the impact of Chinese imports. Even as the inquiry is ongoing, domestic stainless steel producers have urged the government to levy an anti-dumping duty on Chinese stainless steel.

However, the user segment largely comprising utensil manufacturers, have opposed levying any such duty, given that they now have access to stainless steel at a third of domestic prices. This, in turn, helps them in export markets. 

In a letter to the Directorate General of Safeguards, Customs and Central Excise, All India Stainless Steel Industries Association vice president Anil Agarwal, said “Levy of any safeguard duty will make stainless steel costlier which would make us uncompetitive in exports markets. In addition to a forex loss of Rs 2,500 crore, the safeguard duty levy will also put over 300,000 workers directly employed by utensil industry, at stake.”