Govt may impose 10% import duty on flat steel products

With a view to bring relief to the domestic steelmakers, the finance ministry is likely to impose a 10% import duty on flat steel products
(hot- and cold-rolled coils) shortly. The ministry, which is likely to announce a new fiscal package for the steel sector next week, may also re-impose 14% countervailing duty (CVD) on bars and structurals (primarily for steel) and withdraw export duty on steel products that were left out from duty waiver earlier.

“The steel ministry submitted a new fiscal package for approval to the finance minister (FM) on Friday. Though the FM has given an assurance of full support to the steel ministry, the decision on duty rejig may be announced once Prime Minister Manmohan Singh returns from Beijing,” an official source said.

While the finmin is likely to change custom duty structure on steel, it is unlikely to reduce excise duty on the metal as suggested by the steel industry earlier. The industry had earlier asked steel ministry to reduce excise duty on steel products from present 14% to 8% level. Long steel products used for construction activities may also escape the 10% import duty. However, the CVD (14%) waiver on few long products may be withdrawn to create a level playing field.

The new fiscal package is likely to come as a breather for steelmakers including Tata Steel, JSW, Essar and Ispat who have been finding it difficult to sell their products in the domestic market due to the suppressed demand and cheap imports coming from countries like Ukraine, Thailand and China. The landed cost of steel from these countries has reached rock bottom level of between $500 -$600 per tonne, much lower than prevailing domestic steel price.

The steel industry had demanded import duty up to 15% on steel products besides fixing a floor price of $800 per tonne on imports to prevent dumping from China, Ukraine and Thailand.

Tata Steel Says Prices to Fall This Quarter on Waning Demand

Tata Steel Ltd., India’s largest producer, said prices will decline by more than 10 percent this quarter as slowing economic growth and the global credit crunch forces builders and automakers to slash orders.

Prices per ton of steel will fall as much as 4,000 rupees ($80) by December, Chief Financial Officer Koushik Chatterjee said today in Mumbai, where the company is based. Demand from makers of trucks and buses have fallen, while supplies to cars and other light vehicle have remained flat, he said.

Deepening concerns about the global economic slump is keeping consumers away from purchases of houses, cars and home appliances, lowering demand for steel worldwide. ArcelorMittal, the world’s biggest steelmaker, and Tata Steel’s U.K. unit Corus have said they plan to cut production.

“Indian steelmakers will see a fall in realization by at least 20 percent this quarter as demand is hit,” said Bharath S., an analyst, at Sundaram BNP Paribas Mutual Fund, which sold Tata Steel shares last quarter. “Also, expenses are unlikely to come down as both raw material and borrowing costs remain high.”

Tata Steel shares fell 14 percent to 178 rupees at close of trading in Mumbai today. The stock has fallen 81 percent this year, compared with a 57 percent decline in the benchmark Sensitive Index. Rival Posco has dropped 56 percent in the period, Nippon Steel Corp. 60 percent and JFE Holdings Inc. 64 percent.

“Steel shares are being hammered because people don’t expect demand to revive in the next few quarters,” said Sanjay Makhija, vice president at Fortune Financial Services India Ltd. in Mumbai.


Second-quarter profit, excluding unit Corus, rose to 17.9 billion rupees ($358 million), or 21.75 rupees a share, in the quarter ended Sept. 30 from 11.9 billion rupees, or 15.58 rupees, a year earlier, Tata Steel said today in a statement. Profit beat the 16.5 billion rupee median of five analyst estimates compiled by Bloomberg. Sales climbed 41 percent to 67.4 billion rupees.

Revenue from sources other than steelmaking jumped to 1.06 billion rupees from 610 million rupees a year earlier, the company said, without giving details. Tata Steel’s raw material costs surged 73 percent to 13.8 billion rupees, while interest charges rose 34 percent in the quarter.

The company reported a foreign-exchange loss of 3.45 billion rupees, compared with a gain of 610 million rupees, after a slide in the Indian currency against the dollar in the quarter forced the company to revalue its overseas debt.

Moody’s Investors Service lowered Tata’s credit-rating outlook on Oct. 22, citing challenges its U.K. unit faces because of the global economic slowdown.

The Indian rupee, which fell as much as 50 against the dollar to a record, is the worst performer in Asia this year after South Korea’s won.

Tata Steel is looking at forming iron-ore and coal ventures in Mozambique and scouting for limestone ventures in Oman, to secure raw material supplies, Chairman Ratan Tata said in August.

While Tata Steel imports a third of the coal needed for its mills in India and mines its own iron ore, Corus buys both the raw materials. Both iron ore and coking coal prices surged to a record this year on increased demand from China, the biggest producer of the metal.


LN Mittal elected World Steel Association chairman

London-based India-born billionaire Lakshmi Niwas Mittal has been elected chairman of the World Steel Association (Worldsteel), which represents about 180 steel producers from across the globe.

Mittal’s election as chairman till October 2009 was announced Monday after a meeting here of the board of directors of the association, which also changed its name from the earlier International Iron and Steel Institute.

The Indian steel magnate was also elected as member of the worldsteel executive committee, while Naveen Jindal-led Jindal Steel and Power Ltd joined the association as an associate member in the category of steel companies producing less than two million short tonnes per annum, a statement from the association said.

The new vice-chairmen elected to the worldsteel were Ku-Taek Lee, chairman and CEO of POSCO; Paolo Rocca, chairman and CEO of Techint Group; and John Surma, chairman and CEO of US Steel.

On behalf of the board of directors, director general of the World Steel Association Ian Christmas welcomed Mittal as the new chairman.

“The board of directors expressed their gratitude to Ku-Taek Lee as he completes his year as chairman and gave a warm welcome to Lakshmi Mittal. We are delighted to welcome our new members on board,” Christmas said.

“Since we were formed in 1967 the world for steel has substantially changed and so has this organisation. We are now a truly global body representing 18 of the world’s 20 largest steel companies, including six of the top 10 producers in China,” he added.

Besides Mittal, the 2008/9 executive committee includes: Hajime Bada, JFE Steel Corporation; Daniel DiMicco, Nucor Corporation; Jorge Gerdau Johannpeter, Gerdau SA; Karl-Ulrich Köhler, ThyssenKrupp AG; Ku-Taek Lee, POSCO; Alexey Mordashov, Severstal JSC; Shoji Muneoka, Nippon Steel Corporation; M. Aydin Müderrisoglu, Erdemir; Paolo Rocca, Techint Group; John Surma, US Steel Corporation; Sakari Tamminen, Rautaruukki Oyj, Philippe Varin, Corus Group; Lejiang Xu, Baosteel Group; Xiaogang Zhang, Anshan Iron & Steel Corporation; Ian Christmas, World Steel Association.

Four new companies – Badische Stahlwerke GmbH, Deacero, S.A. de C.V, Laiwu Steel Group Ltd and Metalloinvest Management Company – were inducted as regular members, companies producing more than two million short tonnes per annum.

Steel consumption to grow, but at moderate pace

Steel consumption is likely to grow but at a moderate pace over the next two years, according to Citinank analysts.

While contract prices have declined given the recent fall in international prices, they are still higher on a year-on-year basis.

Meanwhile, domestic steel companies are likely to continue acquisitions abroad, focusing on the mining sector, in an effort to improve integration of raw materials, add analysts.

For instance, players like JSW Steel plans to increase its capacity by 2020 with two greenfield projects of 10m tonnes each in West Bengal and Jharkhand, and it is also attempting to increase its captive supply of key raw materials via its overseas mines.

JSW Steel has 25 per cent captive iron ore, but is fully dependent on external sources for coal. It expects to attain self sufficiency to the extent of 40-50 per cent in iron ore and coking coal over the next two to three years, via a combination of expansions of captive mines and JVs both in India and countries such as Chile and Mozambique

Steel prices, prod may come down on global crisis

Indian steel makers may cut prices and as also production in tandem with dip in demand in domestic market spawned by a global slowdown.

The growth targets may also have to be revised from double digit to single digit, though the long-term expansion plans of companies could remain intact, they added.

“The production growth in the steel sector is likely to decline to 8-9 per cent this year from the expected 12-13 per cent due to global economic slowdown,” JSW Group Chief Financial Officer Sheshagiri Rao told PTI.

Indian steel companies would have to cut prices to survive, else domestic market will be flooded with cheaper imports, he said.

Globally, steel prices have softened by about USD 350 per tonne in the last couple of months, alluring large-scale consumers to go for cheaper imports from countries like China and Ukraine.

“The global turmoil has affected demands and put pricing pressure in the US. These would have a ripple effect on Indian market too,” an Essar Group spokesperson said.

British steel giant Corus, part of Indian conglomerate Tata group, has already said it is taking steps to optimise production as per the changing demand scenario.

Even as the dynamics of global economic market continues to change, the domestic steel firms don’t see its impact on their long-term expansion plans.

“We have secured finances for our projects lined up till 2010. In this scenario, however, raising capital from abroad will not be easy,” Rao said.

India’s largest steel producer SAIL too said the crisis would not affect its expansion plans as it has enough financial resources.