To counter Chinese dumping, double import duty: Steel Ministry to FinMin

Steel Ministry is seeking a 100 per cent increase in basic customs duty on the import of the metal, raising it to 15 per cent, from the existing 7.5 per cent. Acknowledging that there is a surge in imports from China, to one-third (33 per cent approx) of steel imports, the Ministry has cited its own internal assessment, and recommended to the Finance Ministry that safeguards, Similar to those implemented by some other nations in the European Union, the USA and others, should be considered.

This is the first time that the Steel Ministry is acknowledging the surge in the import of finished steel from China, which the industry often refers to as dumping and claims is distorting domestic market dynamics.

The Ministry’s assessment notes that “all-new capacities being added to the region are mainland Chinese investments targeting export markets like India.”

In a letter dated September 24 to Revenue Secretary Sanjay Malhotra, Union Steel Secretary Sandeep Poundrik has urged “intervention” to address the “pressing issue” of the surge in imports and to explore the possibility of doubling basic customs duty (BCD) “to 15 per cent on steel products to safeguard the interests of the domestic steel industry”.

The 12–page letter (and internal assessment of the Ministry), a copy of which has been reviewed by businessline,also detailed out the Steel Ministry’s internal assessment on the issue of Chinese imports and rising shipments of steel “being diverted” from other ASEAN nations, particularly Vietnam, as the nation continues to “exploit” the zero customs duty benefit under the India – ASEAN Free Trade Agreement.

• Also read: Amid rising imports, domestic steel firms cut prices to protect market share

India – ASEAN FTAs

It has also taken note of another issue, India-ASEAN FTAs being used to route lower-priced metal from China or from steel mills in South Asian nations that have direct investments from China.

“The current import price of steel products from China is significantly lower than the domestic price at the 7.5 per cent BCD. Our assessment indicates that even if the BCD is increased to 12.5 per cent, the import price would still be lower than the domestic price,” the Steel Secretary mentioned in his letter.

According to market consultancy firm BigMint, the average price of benchmark hot rolled coils (HRC) in India during September 2024 was ₹48,200 per tonne, or $574 per tonne. In contrast, the price of the metal coming in from China was $462 per tonne, while that from South Korean was $500 per tonne.

“Despite a consistent increase in steel inventory over the last two years, imports have continued to rise, indicating a concerning trend where imported steel is increasingly displacing domestically produced steel in the market,” Poundrik (Steel Secy) mentioned in his letter.

India is already a net importer of steel for FY24. In the first five months of the fiscal year (April-August) it continues to remain so, with the trade deficit widening to ₹14,911 crore. During this period, steel imports reached 3.72 million tonnes (mt), up 34 per cent and HRC and CRC were the major categories.

• Also read: Govt mulls import duty hike on steel to counter Chinese ‘dumping’

Protecting Investment

The Steel Secretary, in his letter, referred to the need to mitigate potential losses and “ensure continued growth” in the steel sector to “revitalise” the investment ecosystem. “Steel, with a significant multiplier effect on both GDP (1.4x) and employment (6.8x), makes it a critical component of the economy,” the letter stated.

Another industry concern mentioned in the letter was cheaper imports of finished steel are adversely affecting the profit margins of Indian steel companies. Nearly ₹75,000 crore of capex is “under threat” due to disruption in the investment cycle.

The Ministry’s internal assessment show, steel consumption in ASEAN nations is around 75 mt-25 mt of imports & 50 mt of domestic production. Existing capacities in the region are 78 mt and will move up to 104 mt in coming years.

“Nearly 40 per cent of China’s exports are destined for ASEAN countries, Korea and Japan which have FTAs in place with India. As a result, these nations can potentially act as pass through country for Chinese exports to India,” it was noted.