Commodity Analysis

A ‘duty’ to fight dumping of steel products

Satya Sontanam | Updated on July 21, 2019 Published on July 21, 2019

Move to protect local players could adversely impact solar power sector

Imports of flat rolled products of steel, plated or coated with alloy of Aluminium and Zinc (Al-Zinc), might attract anti-dumping duty (ADD) soon, as recommended by the Directorate General of Trade Remedies (DGTR), an investigation arm of the Finance Ministry.

The alloy of Al-Zinc resists corrosion and is used in the infrastructure, solar power, white goods and appliances, and real estate (for roofing, walling, decking, cladding and framing) sectors.

Local players at risk

The DGTR recommends anti-dumping duty to provide a level-playing field to domestic manufacturers of the product by disincentivising cheap imports. However, the move could also negatively impact the booming solar power industry.

The Finance Ministry is soon expected to take a final decision on the duty.

According to the report submitted by the DGTR to the Finance Ministry, the demand for Al-Zinc alloy has soared, with increasing orders from the solar energy sector. From 2017-18, the price of imported Al-Zinc coated steel from China, Vietnam and Korea has been substantially lower than the cost of domestically produced Al-Zinc coated steel. Domestic players who made investments in plant and machinery to manufacture alloy-coated steel have felt the pinch.

Domestic players have the capability to cater to the increased demand for Al-Zinc coated steel with similar physical characteristics and usage as imported products. Yet, their demand has been poor, and capacity utilisations are falling. Indian industry claimed that the imports of the alloy-coated steel shot up from 17,695 tonnes in FY16 to 2,02,711 tonnes in the year to September 2018. This has impacted the domestic industry’s profitability: local players went from a profit of 100 indexed units in 2015-16 to a loss of 5,112 indexed units in 2017-18. The return on capital employed (ROCE), too, collapsed from 100 indexed points to 7 indexed points over the same period. The DGTR, therefore, recommended imposition of anti-dumping duty on such imports from China, Korea, and Vietnam in the range of $68-130 per tonne, $28-123 per tonne, and $45-200 per tonne, respectively.

As per the report, anti-dumping measures would not restrict imports from those countries, and, therefore, would not affect the availability of the products to the user industries.

Solar industry takes a hit

However, the anti-dumping duties, if effected, could hurt some user industries. Al-Zinc is extensively used in solar panels to prevent corrosion from red-rust on the edges. One of the imported Al-Zinc products — PosMAC (POSCO Magnesium Aluminium Alloy Coated Steel) — is extensively used in solar panels. The 25-year economic life of PosMAC is coterminous with that of solar panels, which renders it suitable for solar structure fabrication and support structure.

According to CARE Ratings, the solar sector will require about 2.1 million tonnes of Al-Zinc-coated flat steel products to meet the ambitious solar energy target of 70 GW by 2022.

CARE reckons that the imposition of anti-dumping duty on Al-Zinc will increase the cost of solar power projects by 2 to 4 per cent and will impede the growth of solar power in India.

As an alternative to an anti-dumping duty, therefore, stakeholders from the industry suggest that the government consider providing low-interest loans to Al-Zinc-coated steel manufacturers so they can make products at competitive prices.

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Published on July 21, 2019
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