Indian steel mills hike prices despite customs duty cuts
Indian steel mills increased the price of the benchmark hot rolled coil by Rs 1,000-1,500 per tonne on Wednesday, despite a reduction in the customs duty on a list of steel products announced in the union budget as a move to bring down high domestic prices.
State-run Steel Authority of India hiked the price by around Rs 1,000 per tonne, while JSW Steel and ArcelorMittal Nippon Steel (AMNS) increased it by around Rs 1,500. Other steelmakers are expected to follow suit.
However, steel mills reduced the TMT bar price by around Rs 3,500 per tonne from Wednesday citing the global demand-supply scenario, people in the know said.
An executive at one of the top steelmakers said prices have gone up in line with the global trend. The latest increase is merely an adjustment of contracts with customers like original equipment makers, which happen every 15 days and is not a major hike, the executive said, requesting anonymity.
Currently, the hot rolled coil prices are quoting Rs 54,000-55,000 a tonne, a rise of almost 55% since it hit the lowest in February of 2020 at Rs 36,000-38,000. TMT bars are now priced Rs 62,500-65,000 depending on the quality and size.
“This current price hike seems to be a roll-over of trade prices to the OEMs, where there was a mid-month price hike in flat products.,” Emkay Global research analyst Vishal Chandak told ET.
The finance minister, while announcing the budget, said customs duty would be reduced to 7.5% from 12.5% on semis, flat, and long products of non-alloy, alloy, and stainless steels. The budget has also temporarily exempt duties on steel scrap and suspended countervailing duties and anti-dumping duties on certain products.
Top steelmakers and analysts reacting to the budget said the customs duty reduction would have very little impact on the domestic prices as most of the imports are from free-trade agreement countries like Japan and South Korea.
“Domestic prices have gone up by 55% and international prices by more than 80%. Domestic prices are at a discount to landed cost of imports,” said Seshagiri Rao, joint managing director at JSW Steel.
“Chinese prices were $680 per tonne, and if we add $25 for transporting to India and with 7.5% duty it’s another $53, so the total price is $758 per tonne, or is Rs 55,364 … and the domestic price is around Rs 56,000-58,000 without GST,” Rao added.
Analysts said the customs duty rejig would have benefited if imports from China were high.
“Ideally, in a normal situation, this should have resulted in a correction in domestic prices of around Rs 2500 to Rs 2,700 per tonne assuming that international landed prices are closer to Rs 55,000 per tonne.,” said Emkay Global’s Chandak, adding that this would change if exports from China increased.
Today, 70% of imports in India happen through the free trade agreement countries, where the duty is anyway nil, he added.
The government wants to control steel prices, said AMNS India’s chief marketing officer, Ranjan Dhar. “It is extremely critical for Atmanirbhar Bharat and achieving a virtuous cycle of economic growth, job creation and increase in purchasing power. Change in duty structure should not dent the capex plans for steel companies in India and more importantly should not give a sense that we are an ‘import-nirbhar’ (import-dependent) nation,” he added.
Date : Feb 03, 2021
Source : https://economictimes.indiatimes.com/industry/indl-goods/svs/steel/indian-steel-mills-hike-prices-despite-customs-duty-cut/articleshow/80675547.cms