Indian government likely to impose safeguard duty on HRC as an interim measure to deal with cheap imports.
The sudden surge in flat steel imports from China has caused turbulence in Indian steel industry. China’s steel industry is facing demand-supply mismatch which has compelled it to dump its flat steel products on foreign shores at throwaway prices. Japan and Korea also supply at competitive price as per the FTA. Russian flat steel supply has also increased in India over past few months owing to its currency depreciation. Russian steelmakers are getting better realizations in export markets as compared to domestic offers.
Source: SteelMint Research
Landed cost of import lesser than domestic offers
Despite correction of more than 20% in domestic HRC prices over last one year, landed cost of imports is still 13% to 15% less than the domestic offers. Because of cheap imports, profitability of major steel giants like JSW, Tata Steel and SAIL is severely impacted. In a move to protect themselves, major steel giants have filed a petition to impose safeguard duty on flat steel products.
Import duty vs Safeguard duty
Indian government recently hiked import duty by 2.5%, making it 12.5% on HRC. However, this move was not much welcomed by the domestic steel players as only Chinese products are liable for this import duty, whereas imports from Japan and Korea are exempted from the same (reason being FTA signed with both the nations). Therefore, Indian steel players are demanding imposition of safeguard duty on HRC products which will cover all countries, including the FTA nations.
Govt may impose provisional safeguard duty
As per market sources, steel giants have filed petition for safeguard duty with Directorate General of Safeguards and preliminary investigations have been initiated. Though the final investigation takes a period of 6-7 months, provisional safeguard duty can be imposed based on preliminary findings conducted within 1-2 months from the date of initiation of investigation. Provisional duty is applicable for not more than 200 days.
It is anticipated that safeguard duty imposed will be in the range of 15% to 30%.
Domestic Prices Vs Landed Cost of Imports
| China | ||||
|
|
SD 0% | SD 15% | SD 20% |
|
| CIF (USD/MT) | 325 | 325 | 325 | 325 |
| Exchange rate | 66 | 66 | 66 | 66 |
| CIF in INR/MT) | 21,450 | 21,450 | 21,450 | 21,450 |
| Assesseable value | 21,665 | 21,665 | 21,665 | 21,665 |
| BCD @ 12.5% | 2,708 | 2,708 | 2,708 | 2,708 |
| Safeguard duty | 0 | 3,250 | 4,333 | 6,499 |
| Countervailing duty @ 12.5% | 3,047 | 3,047 | 3,047 | 3,047 |
| Central Excise Education cess | 115 | 115 | 115 | 115 |
| Customs Education cess | 58 | 58 | 58 | 58 |
| Total | 27,592 | 30,841 | 31,925 | 34,091 |
| SAD @ 4% | 1,104 | 1,234 | 1,277 | 1,364 |
| Port Handling charges | 1,200 | 1,203 | 1,201 | 1,202 |
| Total Landed cost of Import | 29,895 | 33,278 | 34,403 | 36,657 |
| Domestic Prices in INR | 33,000 | 33,000 | 33,000 | 33,000 |
| Domestic Prices in USD | 453 | 504 | 521 | 555 |
| (Premium/Discount) | 3,105 | (278) | (1,403) | (3,657) |
Source: SteelMint Research
The domestic HRC price in USD is 500/MT. In absence of safeguard duty, landed cost of imports from China is USD 453/MT whereas from Korea and Japan it is USD 454/MT and USD 455/MT respectively. If 15% safeguard duty is levied, the landed costs of imports from China, Korea and Japan will increase to USD 504/MT, USD 512/MT and 513/MT respectively. Thus it can be can be observed that imposition of safeguard duty can help Indian steel industry to combat the impact of cheaper import from China, Japan, and Korea.
Leave a Reply