The government’s bid to rein in inflation by imposing export duty on steel products may result in an oversupply in the domestic market.
Export duty of 15 per cent on the primary products will increase the supply of hot rolled products in the domestic market.
The export disincentive for cold rolled and galvanized products, in which HR products are used as an intermediary, could aggravate the situation.
The steel producers may either absorb the duty and sell below cost in the international market and increase prices in the domestic market, or shun exports and resort to production cuts.
Essar Steel Holding CEO J Mehra said the move had serious implications. “Unless the government takes initiatives to facilitate additional capacities, such measures are counter-productive. The move will hinder the steel companies from increasing capacity, which is the need of the hour. The industry has been pointing this to the government for quite some time but without effect.”
Industry sources said steel prices in the international market were higher by 100-200 euros on an average. Domestic HR coil prices are ruling at around Rs 35,000 per tonne, ex-plant, as the companies have decided to hold prices to moderate inflation.