India must curb steel dumping, revisit Asean FTA, say JSW Steel’s Acharya

Mumbai: India must introduce restrictions on “predatorily priced” steel imports and revisit free-trade agreement (FTA) with the Asean bloc at a time when inbound shipments of low-priced steel have surged, hurting the profitability of domestic manufacturers, said a top executive at the country’s largest steelmaker.

Asean stands for the Association of Southeast Asian Nations, an economic and political union of 10 Southeast Asian countries with headquarters in Jakarta.

Steelmakers in India are investing significant capital to increase their local manufacturing capacity, betting on demand growth fuelled by New Delhi's massive infrastructure development. These companies are seeking a curb on steel imports to protect their investments.

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“Unless there is a measure to contain unfair trade diversion at predatory prices, it will be difficult for the industry to be able to put up this kind of capex,” Jayant Acharya, joint managing director of JSW Steel, said.

“Because if our margins get impacted, naturally, then the ability to put in capex gets impacted,” he emphasized.

JSW Profit Dip

JSW Steel, which has the largest domestic steelmaking capacity in India, reported a dip in its profit for the June quarter. A key reason for the profit decline was the soft steel price during the quarter, which failed to pick up after the national elections.

The matter has been raised with the government by the steel industry lobby Indian Steel Association (ISA), Acharya said.

India imported 1.9 million tonnes of finished steel between April and June, which was 28% more than the same period a year ago, as per government data published by Joint Plant Committee. Export of steel during this period fell 36% year-on-year to 1.3 million tonnes, making India a net importer of the alloy.

For context, India’s apparent steel consumption during the quarter was 35 million tonnes. Thus, the imports translated to about 5% of domestic consumption.

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Former Union steel minister Jyotiraditya Scindia had earlier this year said that India becoming a net importer of steel was not a big concern for the government, as the imports were negligible compared to consumption.

Cheaper Imports

However, steelmakers lament that while import volumes may not be high, cheaper imports force domestic mills to drop their prices, eroding their margins.

“We all know that China has a surplus steel capacity, and they're continuing to produce at a higher level. Their domestic demand is soft. Therefore, the additional production is finding its way into the international market,” Acharya said. “That is what is coming into India as well.”

Chinese steel export was higher in 2023 every month between January and June, as per data shared by JSW Steel in an investor presentation. Chinese exports were in excess of 8 million tonnes every month during this period, except in February, when it was just under 8 million tonnes.

Imports from China, South Korea and Asean countries, especially Vietnam, were the key concern, Acharya said.

“There are other countries which have put anti-dumping measures, including some of our FTA members where we have zero duty, but they have taken some measures against us. So those need to be re-evaluated, especially the Asean FTA,” Acharya said.

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India has an FTA with Asean, from where steel can be imported without any duties.

“There are other countries which have levied trade measures and barriers to see that this trade diversion does not happen. Whereas in India we are vulnerable because we do not have any trade measures in place,” Acharya said.

In July, the United States announced new rules that stated firms exporting steel, among other products, to the country from Mexico must show the origins of the product. This was seen as a measure to curb re-routed steel imports from countries like China. The US levies 25% duty on steel imports from China.

In May, Latin American countries like Mexico, Chile and Brazil raised tariffs on steel imports. The European Union already has a Tariff-Rate-Quota system which imposes additional levy on imports from a country once inbound goods reach 105% of the average of imports from that geography in preceding years.