Stainless steel sector drowned by Chinese, Indonesian imports

Anil Kumar Chaudhary | Updated on September 28, 2021

The industry lists out the short, medium and long term remedial measures.

The staggering 177 per cent increase in stainless steel imports as compared to last year’s (FY 21) average, mostly from China and Indonesia, has put the entire industry in peril.

The Indian stainless-steel sector, the second-largest producer and consumer globally, has a total capacity of more than 50 lakhs tonnesannually, which is sufficient to cater to the total needs of the domestic industry. 

Twelve per cent of the stainless steel is used in construction and infrastructure, 13 per cent in automobiles, railways and transport, 30 per cent in capital goods and 44 per cent in durables and household utensils and 1 per cent in others. Stainless Steel is environment supportive (low emission footprints, recyclable, low maintenance, etc.), people-friendly (production safe, inert, fire-resistant, crash-resistant, aesthetically appealing, etc.) and economical (longer life, lesser life cycle cost, higher returns, etc.), making it highly sustainable. 

Moreover, the industry is capable of producing all varieties of stainless steel. It has been growing at a compounded annual growth rate of 8 to 9 per cent for the past four decades, compared to the global average of 5 to 6 per cent, according to the Indian Stainless Steel Development Association (ISSDA). 

Government’s supportive measures

The Steel Ministry has taken several steps to support the Indian stainless steel industry. The industry faced major hardships when imports crossed the five lakh tonne mark in 2015-16 (about 20 per cent of annual consumption). To overcome the difficulties, the government has undertaken measures like imposition of anti-dumping duty (in June 2015), stainless steel quality order, 2016 (effective from February 2017) and countervailing duty-CVD (in September 2017) against imports from China. All this helped to reduce the Chinese imports substantially. However, the successful growth story of the stainless-steel industry has virtually come to a halt after the Budget announcement of February 1, 2021. In the Budget, CVD on import of certain hot rolled and cold rolled stainless steel flat products originating in or exported from China has been temporarily revoked till September 30, 2021. It also announced the revocation of the provisional CVD on import of flat products of stainless steel originating or exported from Indonesia.

Flooding of imports

The Budget decision virtually opened the floodgates of imports into the country. In the first four months of this financial year 2021-22 (April-July of FY 22), there has been a staggering 177 per cent surge in stainless steel imports as compared to last year’s (FY 21) average, and a 159 per cent increase from the 2016-17 average, the full base year before the imposition of CVD on China.

The situation became even more critical In July 2021, when China’s share in the overall stainless steel import basket climbed to 66 per cent and those of Indonesia to 15 per cent, taking the total imports from these two countries to 81 per cent. It is a massive jump from FY 18, the latter  half (post CVD), when China’s share was just 27 per cent, and Indonesia share was only 3 per cent. 

Capacity utilisation

In recent months, the sector’s capacity utilisation has dwindled to 60 per cent, because of the dumped imports emanating from China and Chinese funded industries in Indonesia. And, the bulk of the underutilised capacity is concentrated in the fragmented MSMEs sector, which contributes nearly 28 per cent or 14 lakh tonnes to the stainless steel capacity. 

Such a drastic reduction in capacity utilisation has driven many producers out of business, resulting in significant unemployment in this industry, and has converted many manufacturers into traders. The various associations of re-rollers have also pointed out that many of their members, who wanted to make fresh investments in setting up new plants, have put their investments on hold because of the adverse circumstances.

In a letter to the Finance Minister, the All-India Stainless Steel Cold Rollers Association, a leading body for producing and supplying stainless steel in India, has clearly expressed its complex state of affairs. “As we are recovering from Covid, if the CVD is not urgently imposed, our MSME members would not be able to hold on and shut down and become traders. We submit that China CVD suspension is withdrawn from October 1, 2021, and CVD on Indonesia is also imposed,” the letter said. 

Short, medium and long term solution

So, what can be done to save the stainless steel sector in the short, medium and long term?

First, the government needs to withdraw the suspension of CVD on China dated September 7, 2017. Secondly, accept the fresh final CVD findings on Indonesia as recommended by the DGTR on January 15, 2021, and levy anti-subsidy duty on imports from Indonesia.

Since the stainless steel industry is the top target for imports, it requires significant assistance in creating a domestic fair playing field. There is an urgent need for trade remedial measures to be imposed in ongoing/ completed cases where it has been proved that subsidised stainless steel is being dumped. The much-needed government assistance will improve the profitability of domestic producers, resulting in higher investments within the country, driving the economy. This will result in the creation of jobs and contribute to government coffers as well.

The author is former chairman of SAIL

Published on September 28, 2021

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