India has imported 9.32 million tonnes (mt) of steel items in 2014-15, up around 71 per cent year-on-year. According to steel sector analysts, this has been the highest import of steel items in the past five years.

According to the recently released provisional data by the Joint Plant Committee, export of steel items dropped 8.1 per cent to 5.5 mt.

The production of finished steel at 90.55 mt, was up 3.3 per cent, and consumption at 76.35 mt increased by 3.1 per cent.

The figures indicate reduction of insularity of the Indian steel market and increase in global competitive pressure.

Jayanta Roy, Senior Vice President and co-head of corporate sector rating of ICRA told Business Line that lower landed cost of imported steel items has been behind this surge in import. “The price differential was because of higher domestic cost of production. Internationally, reduction in iron ore prices has been much more prominent than that in the local market during the previous year. This was one of the factors contributing towards higher cost of production,” he explained.

Price of Chinese hot rolled coils (HRC) ruling at around $370 a tonne, at present. This translates into landed cost of imported steel (at port) cheaper by almost $89 a tonne than the prevailing domestic steel prices, after accounting for the current exchange rates, ocean freight and various duties, industry insiders said.

The benefit for Indian producers buying iron ore locally was, however, limited. International iron ore prices dropped by $65 a tonne (from around $115 a tonne in April 2014 to around $50 a tonne now) in the last one year, the domestic price reduction was just around $9 a tonne. “This imparted cost advantage to international players by almost $90 a tonne in steel making, since each MT of steel requires around 1.6 MT of iron ore”, Roy said.

According to a recent report of Ernst & Young, global steel demand forecasts were lowered in the second half of 2014 as the earlier positive momentum faltered. “We are witnessing role reversal as several rapid-growth markets have not performed up to expectations in creating demand. Steel margins are improving as iron ore prices reached new lows, while an increase in new seaborne supply met reduced growth in Chinese steel demand”, the report said. However, steel prices also have drifted, unable to retain the gains on input costs.​

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