Export duty on stainless steel will have long- term implications: Abhyuday Jindal, MD, Jindal Stainless

The 15 per cent duty will have long-term implications on domestic producers.

Earlier, a majority of Indian producers had stepped up efforts to enhance export bases riding on government’s support. However, inability to continue supply might lead this (overseas) customer-base to opt for China and Indonesia.

A major portion of Jindal Stainless’ exports is specialised products and finishes for various high-end applications like oil & gas, pharma, nuclear, petrochemicals, etc. These cannot be diverted to the domestic market due to a lack of an adequate demand.

Export duty will also impact viability of dedicated Indian investments, existing overseas investments which depend on India’s feedstock, and pending EPCG obligations (domestic producers).

India is vulnerable to dumping and imports of stainless steel finished products. The capacity utilisation of domestic industry runs at 60 per cent because of dumped, subsidised, and non-WTO compliant imports from China and Chinese- funded investments in Indonesia.

Bulk of the underutilised capacity is concentrated in the fragmented MSME sector, which contribute nearly one-third or 14 lakh tonnes out of the total stainless-steel flat products capacity of about 50 lakh tonnes.

In FY22, imports from China and Indonesia have increased by 178 per cent over the last fiscal. Moreover, the ratio of imports in domestic consumption has increased to 25 per cent

China’s share in imports has increased to 41 per cent from 30 per cent, and Indonesia’s to 27 per cent from 12 per cent. Major imports from China are also below scrap price.

For Indian producers, these subsidized and imported Chinese and Indonesian stainless steel products lead to reduced price levels on a domestic level.

At Jindal Stainless, we are strengthening our niche value-added product portfolio and working towards developing an indigenous ecosystem, while catering to new opportunities across applications. 

The war disrupted overall supply chains to Russia and caused a two-faced problem for Indian stainless steel producers. We may not be able to divert our Russian exports, worth $200 million per year, to markets like US and EU due to trade defence measures; and secondly two western countries will now also have surplus quantities which will be diverted to an unprotected Indian market. This will be in addition to the Chinese and Indonesian imports we spoke earlier.

For raw material, our dependence on Russia is very low. We (Jindal Stainless) source majority nickel from scrap and nickel pig iron. These are majorly sourced from within India, South-East Asian countries such as Indonesia, and some from Europe. Moreover, we have a diversified mix of product portfolio comprising various series of stainless steel ranging from high nickel to low or no-nickel products.

Since mid-2020, commodity prices were on a continuous rise due to economic recovery post-second wave of the pandemic. This was further triggered owing to the Russia-Ukraine conflict.

Consequentially, over the last few weeks, most of the metal prices have been decreasing on the London Metal Exchange and elsewhere. This can be attributed to another wave of rising coronavirus cases in China, and Fed rate hikes. Scrap prices are not directly linked to pure metal indices.

Even though profitability of most commodity-based industries has seen some improvement, it remains far lower than those of the carbon steel players. Moreover, the stainless steel operates on relatively lower margins, and any fall in raw material price has a negative impact on inventory valuation. (Raw material is 70 per cent the cost of stainless steel making.)

During calendar year 2021, the global stainless steel melt production grew by 11 per cent and consumption by 13 per cent (YoY). India was the second largest consumer of stainless steel at 3.71 million tonne per annum (MTPA) – flat and long products – in FY22 and is expected to register a CAGR of 6.5-7.5 per cent and reach 4.6-4.8 mt in FY22-25.