STEEL COMPANIES INCUR HUGE LOSSES ON CHEAP IMPORTS FROM RUSSIA, CHINA
LOWER CAPACITY UTILISATION TO KEEP LOSSES IN CHECK
As if the damage being done by cheap Chinese steel imports was not enough, even Russian steel is flooding the domestic market now, making primary domestic producers incur cash losses worth Rs 3,000-4,000 per tonne, sources said.
Depreciating Russian currency has allowed even the Russian steel to come to India, making it more difficult for debt laden domestic primary steel producers who are battling with high logistics and interest costs, they said.
Currently, domestically produced hot-rolled coils are being priced at Rs 24,000 per tonne.
DUTY IMPOSITIONS TO CURTAIL STEEL IMPORTS
• 2.5% import duty hike on long products in June • 2.5% import duty hike on flat products in August • Up to $316 per tonne anti-dumping duty on stainless steel in
June • 50-57% anti-dumping duty on imports of cold-rolled flats
products of stainless steel in Dec • 20% safeguard duty in September on hot-rolled flat products of non-alloy and other alloy steel with a width of 600 mm or above “Out of this, logistics cost comes to about Rs 3,500 per tonne, while Rs 4,500-5,000 per tonne goes towards payment of interest. While steel companies are left with about Rs 16,000 per tonne in hand, their cost of production is about Rs 19,00020,000 per tonne. So clearly, there is a minimum cash loss of Rs 3,000-4,000 per tonne for these companies. If interest outgo is higher then loss could be wider on a per tonne basis,” Mumbaibased trader Danesh Mehta, who is also a member of Bombay Iron Merchants' Association, said.
Price of imported hot-rolled coils on the other hand stands at about Rs 21,000 per tonne at present.
Sajjan Jindal-led JSW Steel, Tata Steel, state-owned Steel Authority of India, Jindal Steel & Power and Essar Steel are among the large steel producing companies in the country. Most companies are unable to comment due to the silent period ahead of third quarter earnings.
“Dumping of steel into the country has pushed steel industry to a dead-end. Not only has it driven domestic steel prices to un-remunerative levels, this has also forced the industry to its lower capacity utilisation,” Shivramkrishnan, chief commercial officer of unlisted Essar Steel said. “The sharp drop in steel exports due to protection measures by various countries coupled with rising steel imports at cheap and unfair price levels into India has created a glut in the market which is not in the long term interest of the nation in general, and the steel industry in particular, since the industry has made an investment of over Rs 4.5 lakh crore in creating capacities of 100 million tonnes. The government should immediately take appropriate measures in this regard,” he added.
Last month, domestic steel prices had jumped by Rs 2,000 per tonne after companies stopped selling in anticipation of the government's order to impose minimum import price (MIP).
“Since the government has not acted on the MIP issue, steel prices have corrected by about Rs 2,000 per tonne in the last 10 days,” said another Mumbai-based trader on condition of anonymity.