Impact of Safeguard Duty on Indian Steel Industry

With 20% safeguard duty, though difference between domestic and imported prices will be reduced to a great extent, it is going to hurt the end users i.e. CRC manufacturers.

Indian government’s move to impose provisional safeguard duty of 20% for 200 days came as a relief to the domestic steel industry which was under much pressure due to cheap imports.

As on date, current offers for 2.5 mm imported HRC (SS 400 grade) are assessed at USD 305-310/MT from China and in the range of USD 345-350/MT from Japan and Korea. (All prices are on CNF India basis).

With the new duty structure, imported HRC will be expensive by INR 1,200-1,400/MT than current prices in the domestic market.

According to SteelMint, with 20% safeguard duty imposition, the landed cost of imports from China, Japan, and Korea will increase in the range of 10-15%.

Currently, landed cost of imports from China is about USD 426/MT and after 20% safeguard duty it will increase to USD 490/MT. The domestic prices of HRC is USD 492/MT. Thus with safeguard duty, domestic HRC prices will be able to match the imported offers from China.

However, there is very thin margin between domestic and imported offers and if Chinese exporters lower their prices further, the effectiveness of 20% safeguard duty will remain to be seen.

There is a fall of about 19% in domestic HRC (2.5 mm thickness) prices from Jan’15 till date. According to JPC data, there is increase of about 45% in India’s flat steel imports between Jan’15 to July’15.

A Pinch in Pocket of End Users

Although safeguard duty will help to curb flat steel imports, it will hurt the end users (CRC manufacturers). As safeguard duty is not imposed on CRC, it will encourage buyers to import cold rolled, galvanized, and pre-painted sheets. Which will ultimately hurt CRC manufacturers.

Ankit Miglani, Deputy Managing Director of Uttam Steels Limited quoted, “Safeguard duty imposition has negative impact on us. HRC is key raw material for us and after this move, raw material procurement cost will increase for Uttam Steels Limited.”