Steel duty hike not to have big impact, says India Rating

The benefit of hike in import duty on steel will be minimal as steel shipments from China will still be cheaper than buying it from India.

While the increase of import duty would impact imports from China and Russia, it would not apply to countries which are under Free Trade Agreement with India, such as Korea and Japan.

The Centre on Wednesday hiked import duty on long steel products to 7.5 per cent from 5.5 per cent and that of flat steel products to 10 per cent from 7.5 per cent. The move is intended to increase domestic steel production and help steel producers enhance capacity utilisation, which hovers at about 65 per cent.

The landed cost of steel imported from China is estimated to be cheaper by 12-17 per cent and the current duty hike will fill the price gap by just 2.5, said India Ratings & Research. The benefit may quickly disappear if Chinese exporters indulge in undercutting or if the rupee appreciates, said the rating agency.

Given the bleak consumer spending and falling steel demand, the benefits over the near term is expected to be bleak, it added.

Though this move may not help domestic players in seeing an improvement in demand for their products, it should ease the pressure on them by restricting the fall in domestic prices to some extent.

The import duty could raise steel prices for certain end-user industries such as auto ancillaries, infrastructure companies and construction companies that import from China and Russia.