After U.S. announced steep tariffs on steel imports in the month of Mar’18, as a measure to protect its domestic steel industry, India has become a favourite destination for steel dumping especially for countries like Japan and South Korea. This is because India is in FTA (Free Trade Agreement) for ten years with both the countries which provide an exemption from duties on imports coming from Japan and South Korea.
If we analyse the steel imports coming from Japan during Apr to Jun’18 quarter, the same has increased by 47% Q-o-Q basis to 374,000 tonnes whereas in case of South Korea it has surged by 35% to 746,000 tonnes against Jan-Mar’18 quarter, according to India’s customs data.
China also joins Japan and Korea to dump steel into India
Along with Japan and Korea, steel dumping from China has also registered an increase by 67% to 362,000 tonnes Q-o-Q basis in Apr-Jun’18 quarter indicating the ineffectiveness of the anti-dumping duty imposed by India as a safeguard against steel imports.
As per the market sources, the domestic price of HRC in India is currently trending at USD 675/MT whereas the landed cost of HRC import coming from China including 12.5% customs duty and freight is USD 672/MT, making imports more lucrative for the Indian steel users. Also, the anti-dumping duty reference price for HRC which was fixed at USD 489/MT makes it completely ineffective as the import price of USD 672/MT is much higher than USD 489/MT. The FTA with Japan and Korea makes landed cost of steel from these countries 10% cheaper against that of China.
It can also be seen that the combined exports of steel from China, Japan and South Korea to U.S. have registered a fall of 17% by 241,000 tonnes in Apr-Jun’18 quarter(Q-o-Q basis) whereas the steel supplies from these three countries to India rose by 45% or by 459,000 tonnes during the same period. This indicates that China, Japan, and Korea are not only diverting their steel exports to India that were earlier meant for not just U.S. but also for other destinations such as EU (European Union) as EU post U.S. tariffs announcement had immediately initiated its plans to put safeguard measures in place to protect the European steel industry from cheap imports.
Cautions that can be taken against steel dumping
In this scenario, fears are rife that India which was turned into net exporter of steel over past two years could again turn net steel importer in 2018-19 in the absence of any support from government policy.
Given the surge in dumping, the steel ministry has cautioned against rushing into an agreement at the 16-nation Regional Comprehensive Economic Partnership (RCEP), which also includes China. Before CEPA (Comprehensive Economic Partnership Agreement) was signed with Japan and Korea, the Korean share in India’s total steel imports was 15% which has now jumped to about 30%. Whereas in the case of Japan the same increased from 8% in 2009-10 to 24% in 2013-14 before coming down to 14% in last fiscal 2017-18.
The industry experts believe that in order to protect India from steel dumping, country should implement safeguard duty – a tool that can be employed when their sudden surge in imports, steel shall be exempted from FTAs with Japan and Korea, customs duty should be doubled from 12% to 25% and anti-dumping duty reference prices can be raised by another USD 150-200/MT for various steel products.
