Steel import duty hike to have `minimal` impact: India Ratings

The government on Wednesday raised import duty on long steel products to 7.5 per cent from 5.5 per cent and on flat steel products to 10 per cent from 7.5 per cent. However, ratings agency India Ratings & Research says that the impact of the hike in import duty will have minimal impact, given the price differential between domestic and imported steel prices.
The impact of the hike in import duty on the overall steel sector is likely to be moderately positive over the long term; however, any near-term benefit is less likely given bleak consumer spending and falling steel demand. The agency adds, The hike in steel import duty will reduce the gap between domestic steel prices and the landed cost of Chinese steel, estimated between 12 per cent – 17 per cent, only by around 2.5 per cent. Moreover, the benefit may quickly disappear if Chinese exporters indulge in undercutting and or if the rupee appreciates.
Though this move may not help domestic players in seeing an improvement in demand for their products, it should ease the pressure on them by restricting the fall in domestic prices to some extent.
While the increase of import duty would impact imports from China and Russia, it would not apply to countries which are under Free Trade Agreement with India, such as Korea and Japan. The government has taken his move to increase domestic steel production and discourage imports. This will help steel producers currently struggling at capacity utilisation of near 55%-65% to improve their utilisation.
The import duty could raise steel prices for certain end-user industries such as auto ancillaries, infrastructure companies and construction companies that import from China and Russia. Steel traders who import from these countries could also see a dip in their already slim margins if steel demand remains weak.

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