With the global economy showing no sign of improvement and the rating agencies and financial institutions revising downward their projections on GDP and trade volume for the second half of 2013, each steel producer is busy trying to keep pace with the changing scenario and adapt measures to hold on to the bottom line, if possible.
The situation provides an opportunity for steel producers to interact more frequently with the concerned government agencies dealing with steel, mines, heavy industry, energy, transport, environment, finance and commerce, in anticipation of specific policy supports. The need for close interaction is felt imperative by the government, also in view of widening trade deficit, slow industrial growth and lack of fresh investment and a clear signal of dampening of entrepreneurial efforts.
Apart from the measures benefiting particular segments of the industry, the announcement on the long-pending economic reforms and a firm commitment to pass and implement the bills lying in Parliament for want of political consensus, would largely contribute to building up the market sentiments.
The industry is quite eager to know the fresh doses of reforms that would follow the initiatives introduced a month back, including the measures to be announced by RBI later in the next month. For the steel industry, one genuine concern relates to growth of import arrivals.
During the first six months of the current fiscal, steel import has grown by 38%.
It is to be noted that without this growth in imports, the growth in steel consumption of 5.4% as per the official estimates would have been limited to 3% only. JPC data on steel consumption may not adequately capture the production of large number of induction furnace and re-rolling mills, but the growth in steel consumption in the country, which includes net imports (imports minus exports) as shown by the JPC, appears to correctly reflect the current scenario.
One major aspect that has contributed to the substantial growth in imports is significant volume of CR Sheets/Coils coming from Japan and South Korea as a follow up to the FTAs signed with them in 2011. These two countries comprised 60.4% of the total volume of CR imports of 0.78 million tonne during April-September 2012.
In non-alloy imports during the same period, China?s share of 12.2% is lower than Korea (21.1%) and Japan (16.3%).
China has exported around 40.85 mts of different categories of steel to various countries in the first 9 months of the current year and its major destinations are South Korea, Thailand, Singapore, Vietnam, India, USA, Indonesia, Philippines, Hong kong, Saudi Arabia and others.
From this data, it should not appear that China is not a threat to Indian steel market.
In the first half of the current fiscal, the total trade deficit with China has already reached an alarming figure of US $13.6 billionout of India?s total trade deficit of US $ 89.3 billion and a major component of these imports belong to the engineering and manufacturing sectors comprising heavy machineries, power equipment, pressure vessels and boilers.
All these contain large volume of steel and, therefore, China has appeared to be a major threat to India as an indirect steel exporter.
The Indian steel industry may need to broadbase its analysis of import scenario and work out strategies in consultation with other industrial segments as well as the government to curtail this menacing trend.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal
