Imposition of export duty on Indian steel company has made overseas offerings “uncompetitive”, according to Ranjan Dhar, Chief Marketing Officer, ArcelorMittal Nippon Steel (AM/NS) India. Calling the move a “big blow”, Dhar said historic data suggest that Indian mills “only turn to export markets once they have fulfilled the needs of the domestic market”. In an interview to BusinessLine, he spoke about the impact of the export duty, domestic steel prices bottoming out and AM / NS India’s strategy for the domestic market. Excerpts:
What is the impact of export duty on Indian steel companies?
Export duty imposition made our overseas sales uncompetitive. Indian industry expanded its global market share over the years. For instance, AM/NS India has been a key supplier to several marquee global projects across infrastructure, energy and automotive segments. The duty has come as a big blow, disrupting this flow and bringing exports far below the 15 per cent of the total production - a goal set by the National Steel Policy, which encourages companies to build capacities for domestic use and exports.
Indian (steel) mills are losing clients to competing countries like China and others. Prices saw major corrections in the recent past. Immediate withdrawal of duty can restore India’s image as a dependable source of high-quality steel.
Since the duty is in force for nearly three months now. Are steel companies feeling the pinch?
Price in the global markets are under pressure for the last four months, owing to multiple factors including demand dip in China because of Covid-led lockdowns. Domestic prices saw an over 20 per cent dip in a short span. Without exports, the industry will be forced to cut production, which deters growth plans as steelmakers may choose to avoid risk, and opt to wait for domestic demand to revive.
Has the industry reached out to Centre for duty withdrawal?
Representations have been made to the government explaining all the points. I’m optimistic that the Centre will understand the rationale which is for the long-term good of the nation.
Is it possible for Indian mills to hold on to 25 per cent export growth of FY22?
Multiple lockdowns in 2020 and 2021 caused a huge dent in domestic demand. But because the export markets were available, Indian steel industry could sustain that extremely tough period. When lockdowns were stringent, exports were as high as 50 per cent; but came down sharply to less than 10 per cent once domestic demand revived.
Historic data suggests that Indian mills only turn to export markets once they’ve fulfilled needs of the domestic market. Going forward, if domestic demand fully revives and duty is withdrawn, then growth rate of exports will remain lower.
How is India’s domestic demand shaping up?
Demand in India is strong and outlook looks attractive for the years to come, supported by the Government’s various infrastructure initiatives, including rail (freight corridors), roads, aviation, gas pipeline, housing and water infrastructure. Buying activities are returning as price get settled at new levels and market stock levels are low.
Do you think domestic steel prices have bottomed out?
Steel prices have bottomed out. Further reduction is not viable for companies.
Price of coking coal, a key raw material, has come down but are not coming down further thereby keeping the cost of production high. There have been production cuts in China by more than 50 million tonne per annum and in other regions like Ukraine & Russia. Global demand was muted, but we expect it to come back now. We expect both restocking demand and consumption demand to provide a fillip to the industry.
What is AM/NS doing to improve domestic sales?
Initiatives to boost domestic sales include expanding Hypermarts. Another initiative will be introduced under the Hypermart brand is to enhance our semi urban and rural reach.
Anything targeting MSMEs?
We are committed to support MSMEs, the backbone of Indian economy. Last year, we signed an MoU with the National Small Industries Corporation to provide critical steel products to MSMEs in the sector. The Hypermart model has been received well by the market. It is an open format retail chain where MSMEs can buy quality steel at competitive prices, with swift delivery and transparency in commercials.