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30 Aug, 2012, 05.44AM IST, Rakhi Mazumdar,ET Bureau Steel impor

  • KOLKATA: A sharp surge in steel imports has the domestic steel industry on tenterhooks. During June-July 2012, steel imports rose 40% to 1.471 million tones (mt) against imports of 1.01 mt in the same period last year. Flat steel products used in cars and consumer durables accounted for 63% of total imports.

    Despite an average demand growth of 8-9% a year, low capacity addition in domestic steel sector, where a number of large projects remain stuck, seems to have led to the spike in imports. India, the world's 4th largest steel producer, is now a net importer of steel.

    This comes on top of a 69% rise in imports to 1.528 mt in April-May 2012, according to Joint Plant Committee, which maintains the country's only independent steel industry database. This translates to a 55.7% jump in total imports to 2.99 mt between April and July 2012, compared to 1.92 mt in same period last year. Apart from China, imports are coming in from South Korea and Japan.

    "We are seeing a steep rise in imports due to higher volume of materials coming from countries like South Korea and Japan, with which India has comprehensive economic partnership agreements ( CEPA). A differential rate of duty on steel imports from these countries is working as an incentive," said Kamlesh Bagmar, metals analyst at Prabhudas Lilladher.

    Import duty on flat products was earlier hiked from 5 to 7.5% to curb imports. The FTA restricts import duty to around 4% for material from those countries thus giving them a window of opportunity. "But more significantly, in the global market, demand in conventional markets of South East Asia and even Europe is not good. India is the only growing market where Korean and Japanese producers can send their products," the analyst added.

    China was the top contributor, accounting for nearly 30% of the total imports during April-May followed by South Korea (19%) and Japan (14%). Ukraine and Belgium were the other contributors.

    Of the total imports during April-May this year, 1.329 mt were of flat steel variety. "Price fluctuation is also a factor that affects imports, particularly if domestic prices remain strong vis-a-vis import prices and there is fluctuation in domestic currency," a steel sector analyst pointed out.

    Industry players seem to be feeling the pinch. Vikram Amin, executive director (strategy & business development), Essar Steel, said: "There is a definite case to exclude steel products from the ambit of FTA with Korea and Japan. Considering the high value addition in the steel industry and employment generation potential, it makes immense sense to export steel rather than exporting iron ore and importing steel." Compared to the first four months of FY13, total imports of finished steel increased marginally by about 2.4% to 6.83 mt in 2011-12. Against this, imports touched 6.66 mt during 2010-11.

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