20% Safeguard Duty Slapped on Steel Imports

Provisional duty on certain steel products to be valid for 200 days as domestic players cry foul over rising inflows from China, Japan & Korea

Finance minister Arun Jaitley on Monday announced the government's decision to impose a 20% safeguard duty on steel imports with immediate effect. The duty on specific steel products will be valid for 200 days.This is perhaps the first time in nearly two decades that the government is taking a series of moves to “protect“ the domestic steel industry since it was liberalised in the early 90s.

“A provisional duty of 20% on certain steel products has been introduced with effect from today and it will continue for 200 days,“ the finance minister told reporters in New Delhi.

The government has reacted with remarkable speed in response to an application from domestic steel producers in June.Earlier a government panel comprising commerce, steel and revenue secretaries approved imposition of 20% safeguard duty on imports of specific steel products from China, Japan and Korea for 200 days.

Last week, the Director General (Safeguards) had recommended 20% duty imports after its preliminary findings, following an application by steel producers, indicated “injury“ to domestic industry . With an official notification on this likely to be made soon, India is set to join a host of other countries to similar protectionist measures to shield domestic industry. “It will provide temporary relief to domestic industry by making imports costlier. Earlier, around 1996-97, India had resorted to similar measures to protect its fledging steel industry from threat of imports from CIS countries,“ Sushim Banerjee, director general of the Institute of Steel Development and Growth said.

Safeguard duty will be the latest in a series of steps taken by the NDA government to provide relief to the steel industry. Earlier this year, basic customs duties on steel were raised twice -in June and in August -by 2.5% each time. In stainless steel, where volumes involved are much lower, safeguard duty was proposed but rejected by DGS in March this year, though the government recently came out with a draft quality control order to check imports.

However, in June an antidumping duty of up to $316 per tonne was slapped on imports of hot rolled steel from China and other countries. In 2013, a safeguard duty of 20% was imposed on stainless steel (304 series) from China.

Domestic steel majors have been crying foul over the unprecedented surge in imports in the past year. In 2014-15, steel imports jumped 71% to 9.32 million tonne (mt) from 5.42 mt.

China, Japan and Korea accounted for 76% of total imports which almost doubled to 7 mt from 3.8 mt.

Imports of Chinese steel grew by 232%, Japan by 18% and Korea by 46%, according to steel ministry data. During April-June 2015, steel imports from China and Korea went up by 49% and 105% from Japan, as per data from Joint Plant Committee.

Total imports (including semifinished steel) during Q1 FY16 surged by 57% to 2.7 mt, this time on a higher base. Between 2013-14 and Q1 of 2015-16, higher imports are alleged to have led to flat growth in volumes and stagnant capacity utilisation of 76% in domestic steel industry while companies faced a reduced market share of 37% from 45% earlier.

“Safeguard duty will give us some relief. It will cover the remaining part of the fiscal when steel demand usually perks up post monsoons,“ a steel company executive who did not wish to be named said.

India Ratings and Research (Ind-Ra) estimated that the landed price of hot rolled coils (HRC) from China will be more expensive than domestic steel prices by  Rs.2,000 tonne. Currently, import` ed HRC is cheaper by Rs.2,000.

“This will also provide headroom to domestic steel producers to increase prices and volumes, provided Chinese players do not reduce prices further,“it added.The development led to a surge in steel stocks on the BSE on Monday. Tata Steel gained 3.54% to close at Rs.241.30, while JSW Steel went up 3.08% to close at Rs.992.60.Steel Authority of India Limited (SAIL) went up 1.96% to close at Rs.52.10 while JSPL rose 3.72% to Rs.64.10.close at SAIL and JSW Steel are likely to benefit the most if the government decides to impose 20% safeguard duty on imports of hot rolled steel products, led by higher realisation and lower costs, according to Steels-India, a report by Bank of America Merrill Lynch (BAML).

The Economic Times, New Delhi, 15th Sept. 2015