SteelMint learned from market sources that various trade and industry associations in India have written to the government to make export duty on Graphite electrode (GE) effective, the provision for which was made in the budget for the ongoing fiscal year 2018-19.
In the Union Budget for FY19, the Indian government had made a provision of 20% export duty on Graphite Electrode exports. This means that although the export duty on GE at present remains nil, the government if it deems necessary, can impose a tariff on exports at any point of time, which can be to a maximum of 20% to put a check on the exports of Graphite Electrode.
Introduction of this provision was governed by the government’s intent to somewhat ease the soaring cost pressure on the country’s steelmakers through the EAF route, as the electrode prices had been rising to record levels in the international markets on account of stronger demand and dwindling supply.
Why Indian EAF producers are demanding export duty?
Internationally supplies of the electrodes have been shrinking significantly since the latter half of 2017 mainly due to the decreasing production in China, where the government implemented production cuts for the electrodes on environmental concerns. As a result of this, the exports from China diminished, and the global demand of GE turned towards other nations, such as India and Japan, and these countries saw an abrupt rise in the electrode prices in their home markets.
India’s GE export in the first ten months of 2018 (during Jan-Oct’18) have risen by 6% y-o-y basis and is recorded at 68,517 tonnes against 64,379 tonnes in Jan-Oct’17. The surge in GE exports in 2017 against 2016 was as high as 44%. In terms of prices, India’s GE prices both in domestic as well as the export market have risen by about 40% over the past one year.
In India, around 46% of steel production is through the Electric Arc route. The electrode market in the country is oligopolistic in nature, with only two producers—Graphite India (capacity 98,000 tonnes) and HEG Ltd (80,000 tonnes) dominating the supply scene. The export percentage of these two companies range anywhere between 40 to 75%.
In view of the lower domestic supply and higher exports resulting in higher prices, the EAF steelmakers had last year itself approached the government alleging that the domestic electrode manufacturers had been selling the bulk of their produce in the international markets; and had urged the government to identify a possible solution. As a result, the Steel Ministry had proposed the Finance Ministry to impose a 30% export duty on exports of the electrodes.
Following this proposal even though Finance Ministry did not impose an export duty on GE, it made provision for the same so that both the parties, GE manufacturers and EAF producers can come to a consensus and work in coordination with each other especially in case of GE prices.
However, two months prior to the end of FY19 and the next Union Budget, GE users have once again raised their concerns citing that GE prices in the domestic market has remained quite the same post-budget and that they have no choice but to procure electrodes from the manufacturers still at high prices, rendering them uncompetitive against steel and alloy manufacturers from other routes. Thus, these companies, gathering under the umbrella of various associations, have once again approached the government seeking the imposition of an export tax of 30% either with immediate effect or from the upcoming budget for FY20.
Leave a Reply