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Current Trends in Indian – Asian Steel sector

D. A. Chandekar

The apparent domestic steel consumption was up 8.8% to 13.2m tonnes and production of steel was up 7.5% to 13.8m tonnes in the first half of this fiscal over the same period last year. While steel imports were up 11% to 0.8m tonnes, exports were down 1.4% to 1.4m tonnes for the same period last year .

According to a report on Asian steel sector, India’ s apparent steel consumption is predicted to go up to 9.5% by the end of this fiscal. In the first nine months of’ 02, global crude steel production was up 5.1% year-on-year and Asia’ s crude steel production remained the key to global growth, rising 12% y-o-y to 278.5m tonnes. China’s output rose 24.4% year-on-year but Japan’s production was only up 2.1% higher year-on-year.

On a month-on-month basis, most countries reported declines in production, except Korea, the US and the European Union. In Asia, both China and Japan reported drops in production, down 3.2% and 1% to 14.9m tonnes and 9.lm tonnes respectively.

The report said China has remained a key export destination for the North Asian steel exporting countries (Japan, Korea and Taiwan). For the period of January to July, China imported 9.9m tonnes (+32% year-on- year) of steel from these three countries, accounting for 30% of their combined export volume.

In the first seven months, North Asia exports to Asean rose 20.6% y-o-y to 7.1m tonnes. Exports from Japan rose 26% y-o-y to 4.8m tonnes, but from Taiwan, exports were up slightly by 1.5% y-o-y to 0.9m tonnes.

India has a huge advantage in raw materials based industries such as steel and aluminium as there is abundant supply of good quality iron ore in the country . Indian companies will need to build a focused China strategy, cultivate close customer relationships and focus on quality to tap the market for flat steel. Domestic steel industry needs to further reduce conversion costs to emerge as the lowest cost players, and devise strategies to tap the Chinese flat steel market. . Domestic steel companies, like Tata Steel, have also built globally competitive low-cost positions in the recent years. One of the drivers of Tisco’s low cost position has been the availability of low cost raw material (iron ore) and recent reduction in conversion costs. The company is now taking steps to consolidate its low-cost position by driving down its conversion costs further. China needs around 20 million tonne of steel annually from other countries and this is expected to continue and grow. Indian companies can exploit the potential the Chinese flat market offers basically in hot-rolled coil and plates. Ofcourse, the CIS countries, South Korea and Japan are also the major exporters to China at present.

SAIL exports some quantities of plates. A majority of China ‘s steel imports are high-value flat products, with cold-rolled coils / sheets represent 35 per cent, metal and colour-coated sheets 31 per cent and hot-rolled coils 19 per cent. Alloy plates and stainless steel represent 6 per cent each, while tubes was 4 per cent and others about 9 per cent of the total exports of16.1 million tonne during 2001.

As regards the total Indian exports, the share of South-East Asia was 47 per cent last year, while Europe accounted for 40 per cent of total steel exports.

However, Indian steel companies suffered a major setback in their export initiatives in SE Asia with the initiation of protectionist measures. Thailand, Indonesia, Vietnam and others-major steel consuming countries of this region have started anti-dumping investigations against India and other countries.

China - the world’s largest steel consumer and a major destination for Indian steel -has also extended its import tariffs but has, however, not reduced its import of Indian steel.

Indonesia, it is learnt, has doubled its import tariffs on hot rolled plate and coils and cold rolled steel. The Indonesian Anti-Dumping Committee (Kadi) is now reviewing separate anti-dumping duties on hot rolled coil imports from India, China, Russia and Ukraine. It is expected to determine whether to renew five-year duties the country slapped in September ’97. Though Indonesia imposed a 23-38% dumping margin on Indian HR coil, it was dropped after a year . Indian HR coil has, however, found its place back on the review list.

Chinese imports are currently subjected to anti- dumping duties of 30%. While most local primary steel companies have stopped exporting to Indonesia, Essar Steel sends its HR coils to its cold rolled plant in Indonesia, PT Essar Dhananjaya. Indonesia imported 556,701 tonnes of HR coil, 71, 150 to fines of HR plate and 372,928 tonnes of CR coil in ’01. Imports to the ports there totalled a combined 213,000 tonnes of HR coil and plate for the January-September ’02 period. CR coil imports, meanwhile, totalled 62,900 tonnes.

In Thailand, a satisfactory performance by its largest hot rolled coil producer, Sahaviriya Steel Industries, has been attributed to the government’s anti-dumping measures and import surcharges. While domestic consumption of HR sheet is expected to grow to 20% to 4.8m tonnes this year on the back of improving demand from the automobile and construction industries, the Board of Investment's import surcharges, imposed in January this year, have provided relief to the domestic steel industry . The various safeguard measures led to a reduction in the domestic market share enjoyed by imported products from 54% last year to a current level of 45%. Thailand has an annual capacity of 9mt of long steel and 8mt of flat steel. In ’00, production was 4.65mt while imports were at 4.34mt. Though about 1.47m tonnes of steel were exported, a domestic surplus of 7 .5m tonnes remained. In Vietnam too, the government has said tariffs are raised on imported billet from 7% to 10% from January 1,’03. Recently, China announced that its tariffs, which were to expire in November, will stay in place till May. Though China normally issues a quota to major countries, it has already released quotas for India and other countries.

(Reference – SEAISI Newsletter)

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