20% provisional safeguard duty has reduced the margin between landed cost of imports and domestic HRC prices by about 52%.
Safeguard duty (SG Duty), which was imposed by Indian government a month ago, brought some respite to the pressurized domestic steel industry.
As per SteelMint study, HRC imports have fallen by about 13% from 4,25,247 MT in Aug’15 to 3,68,645 MT in Sept’15. The same is recorded at 98,370 MT from 1-17 Oct’15.
Usually bookings are made two months before the date of delivery. Thus for Aug deliveries, bookings were made in the month of June and for Sep it was made in the month of July.
Fall in imports in September can be contributed to the import duty hike of 2.5% on steel imports announced in latter half of June.
However, news of safeguard duty started doing the rounds in domestic market since Aug’15. Thus, buyers made lesser booking for October deliveries. This is reflected in reduced imports in Oct month.
Owing to safeguard duty announced in Sept’15, a further fall is anticipated in November deliveries. This will help domestic players to clear off their inventory in the coming months.
Safeguard duty impact on landed cost of imports
| Particulars | 0% SG Duty | 20% SG Duty |
| Chinese imported (2.5 mm) HRC offers on CIF bass (in USD/MT) | 285 | 285 |
| Exchange rate | 65 | 65 |
| CIF in INR/MT) | 18,525 | 18,525 |
| Assesseable value | 18,710 | 18,710 |
| BCD @ 12.5% | 2,339 | 2,339 |
| Safeguard duty | 0 | 3,742 |
| Countervailing duty @ 12.5% | 2,631 | 2,631 |
| Central Excise Education cess | 99 | 99 |
| Customs Education cess | 50 | 50 |
| Total | 23,829 | 27,571 |
| Interest cost | 250 | 250 |
| Warehouse charges | 500 | 500 |
| Port Handling charges | 1,200 | 1,201 |
| Total Landed cost of Import in INR/MT | 25,779 | 29,522 |
| Domestic Prices | 32,500 | 32,500 |
| Premium/Discount | (6,721) | (2,978) |
| Landed cost of Imports in USD/MT | 391 | 447 |
Source: SteelMint Research
It can be observed from the above table that the margin between landed cost of imports and domestic HRC prices have reduced considerably with 20% safeguard duty.
*October Imports: From 1-17 Oct’2015
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