SteelMint has heard from its market sources that Indian steel companies through various associations have requested the Indian government to remove the existing import duty of 7.5% on graphite electrodes (GE). The plea has been made for the government consideration in the upcoming budget of FY 2019-20 that will be announced in Feb’19.
Imports do not pose threat: The steel industry has claimed that any kind of import duty on GE does not make any sense in the current market situation as the global electrodes prices have risen dramatically in past one year and the imports do not pose any threat to the domestic GE producers as landed costs of imports are usually at par with the domestic prices.
This claim can be supported by meager quantity of GE imports in India after the removal of 20% anti-dumping duty (ADD) on the imports of electrodes coming from China in Aug’18. According to customs data, India’s GE imports in September stood at 568 tonnes and in October the same were at 766 tonnes.
Increase in price competitiveness: Another key reasoning that is given by the industry for removal of import duty is the rising cost of steel manufacturing for EAF producers (Electric arc furnace) in India due to a significant surge in global GE prices in last one year. As Indian graphite electrodes industry is oligopolistic in nature due to the presence of only two players in the market, the GE manufacturers are taking advantage of the situation and are charging high prices to the domestic steel players without any significant surge in their costs.
Lower grade GE not manufactured in India: Some of the lower grade GE (such as RP grade) that is used by small EAF steel producers in India are not being produced by the Indian GE manufacturers. As these players are unable to bear the burden of high import costs, they have been forced to shut down. Thus, the steel industry participants have reasoned that the removal of import duty on GE will increase the price competitiveness in the market and will also enable the small players to meet their requirement of lower grade electrodes produced in China.
No harm to domestic GE manufacturers: The steel players believe that absence of any trade restrictions don’t pose a threat to the Indian GE manufacturers as they can always gain revenue from the export sales given good demand of high-grade Indian-origin GE in the overseas market.
India has the presence of two key players, HEG Ltd and Graphite India and these two players have been highly benefited with the upheaval in GE industry since the latter half of 2017. The respective capacity of these two companies is 80,000 tonnes and 98,000 tonnes. However, HEG Ltd has recently announced that it is set to add about 20,000 tonnes of additional capacity by 2021.
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