The Hindu Business Line : Import duty does not cheer steel producers

The Government’s decision to impose a five per cent import duty on specified iron and steel items may not significantly impact domestic steel producers.

The differential in domestic steel price and imported price is very significant even after taking the duty into account.

This import duty covers pig iron, semi-finished, long and flat steel products.

Global steel prices

Global steel prices have softened considerably over the last few months amid slowing demand. Domestic steel producers have cut prices (35 to 40 per cent from the peak in case of SAIL) as well as production in the recent past.

The import duty was necessitated in view of cheaper imports from countries such as China, which had led to sagging sales and rising inventories for domestic players.

Marginal Relief

According to data from Bloomberg, Chinese steel trades at around $498 a tonne.

Assuming a conversion rate of Rs 49 a dollar and adding this five per cent import duty, the per tonne rate works out to around Rs 25,200. This is still a good Rs 7,000 lower than what domestic players such a SAIL are selling their steel for.

The present move signals some relief in terms of reducing the differential.

But steel majors may need a more substantial rise in duties and cut in prices to bring this differential down further.

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