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To rein-in prices and preserve domestic supplies, the government today imposed stiff export duty on steel, steel-making raw materials and intermediaries. It also waived import duty on coal.
Per the new order, an export duty of 15 per cent will be levied on hot-rolled and cold-rolled alloy and non-alloy flat steel products (of 600 mm or more width). Similarly, a 15 per cent duty will be levied on exports of hot-rolled bars and rods, other bars and rods of iron or non-alloy steel, flat-rolled products of stainless steel, bars and rods of stainless steel, angles, shapes and sections of stainless-steel.
Iron ore exports (for all grades and including concentrates) will attract a 50 per cent duty. A 45 per cent export duty has been levied on iron ore pellets. The duties come into effect from Sunday.
Levies cut on coal import
The Centre also cut levies on all grades of coal imports (coking and metallurgical) and pulverised coal to offer relief to end-user industries including sponge-iron and secondary steel makers. High energy cost — because of rising prices of imported coal — has been a common complaint from manufacturers.
Rising domestic prices
Steel companies had been increasing prices citing costlier coking coal and rising energy cost. Iron-ore prices, too, have been hovering around their historic highs. With the duty tweak, domestic steel prices are expected to cool.
Typically, a ₹1,000/tonne cost reduction in iron-ore works out to be ₹1,600/tonne reduction in steel prices, all other input costs remaining the same.
“Some correction in steel prices is expected in the coming weeks, which we are hopeful of passing on to our customers,” VR Sharma, Managing Director, Jindal Steel and Power, said.
Domestic steel prices eased to around ₹73,000 per tonne in May from ₹76,000 levels in April but still remain elevated compared to last May prices of around ₹66,000 per tonne.
According to officials across some of India’s top mills, if prices in the international markets rectify to $1,000-1,100 per tonne levels, it would continue to be profitable to ship steel items even with the 15 per cent duty.
Globally, there is a near-45-million-tonne per annum supply deficit, with Russia and Ukraine out of the market, and this is where Indian mills are stepping in.
“Current spot prices of steel, in the export market, are at $900-1,000/tonne and even with the 15 per cent export duty, shipments will be viable,” an industry executive told BusinessLine requesting anonymity.
Weak demand outlook
Globally, steel prices (hot rolled coils) have been declining on weak demand outlook, recessionary pressures and the prolonged lockdown in China.
“Prices are likely to firm up as orders resume from China and Vietnam, a key Indian export market. European quotas are likely to be revised upwards, too. So, the current drop in prices look temporary,” the official said.
In FY22, India’s finished steel exports jumped 25 per cent y-o-y to 13.5 million tonnes (mt).
A Sakthivel, President, FIEO, said the measures will add to the competitiveness of manufacturing and export sector and will push value-added exports. “These measures will also ease the logistics pressure as in some cases the same raw material was being exported and subsequently being imported by downstream users.”
However, exporters say, there are some grey areas. For one, it does not specify a time frame till when the duty will be in force. Also, it is not clear if the levy will apply to orders booked before May 22.
Relief for realty sector
The real-estate sector would be a key beneficiary of any cooling in steel prices. Industry body Credai had been pointing to rising prices of steel and cement that had pushed up construction costs by ₹400-500 per sq ft.
“The move will help real estate developers negate increased construction costs over the last 2 years,” HV Patodia, President, CREDAI, said.
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