N.C. Mathur cut short his holiday in Himachal Pradesh because of the heat that the country’s stainless steel industry is facing. The president of the Indian Stainless Steel Development Association spent his vacation getting anxious calls from members worried over the sudden rise in the imports of utensil-grade steel from China. Since the beginning of 2010, the Chinese have been selling as much as 8,000 tonnes of stainless steel in the Indian market per month; a giant leap from last year’s average of 1,000 tonnes per month.
Thicker grade steel used for industrial purposes is largely protected with anti-dumping duties, but there is no such barrier for stainless steel less than 650 mm in thickness. The Chinese have targetted that segment forcing steel makers to try and lobby with the government for protection there too. “Our members from Rajasthan, Delhi, Kanpur and Chennai are alarmed and have been calling me continuously,” says Mathur.
China is being opportunistic, buying when the price is low and selling when the price is high. But the only reason why China can swing it is the sheer size of its steel industry, at over 500 million tonnes a year, it is almost half of the global production.
“The most obvious effect of the Chinese exports will be on the prices,” says A.S. Firoz, chief economist at the Economic Research Unit under the ministry of steel. Sure enough, prices in India have seen a definite softening since April, and are hovering at $850 a tonne level from over $900 a tonne level. Indian prices are still higher by $100 to $200 a tonne compared to the international rates, but that is little comfort in the wake of cheap Chinese steel.
Companies that have higher costs like Ispat Industries, Essar Steel and JSW Steel are more likely to be affected. There will be less impact on Tata Steel and SAIL as they have their own raw materials and they can afford to reduce prices. Consumer is King
“This [thinner] stainless steel is used to make kitchen utensils, which consumes almost 70 percent of the stainless steel that comes to the Indian market,” says Mathur, who is also a director at Jindal Stainless, the country’s largest stainless steel producer. As Chinese stainless steel is about $200 less than Indian steel, utensil prices will surely go down. Peripheral Benefits
Due to the dip in basic steel prices, all products, including specialised steel, will see their prices come down. Meanwhile, this year China’s export of flat steel, used in automobiles, etc. has hit a peak. So steel users in these segments will immediately gain rather than those in the construction industry, which uses long steel. Raw Materials
Excessive steel production in China holds some benefits for major Indian iron ore exporters like NMDC and Sesa Goa. An increase in China’s steel production will also push up the prices of iron ore. China imports more than 100 million tonnes of iron ore from India annually. While the Indian steel industry is lamenting the price fall, Indian iron ore suppliers are not complaining. Already, spot prices of iron ore have crossed the $150 per tonne mark.
Meanwhile Mathur’s office is asking the government to levy anti-dumping duty on thinner steel also.
(This story appears in the 02 July, 2010 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)