In March 2017, India’s beleaguered steel
industry achieved what had been unthinkable even a few months ago. The
country’s iron and steel exports during the month were more than double their
The enormity of this development can be gauged
from the fact that exactly a year earlier, in March 2016, India’s iron and
steel imports were about three times their exports and local steelmakers were
pleading with the government for protection.
What brought about this turnaround?
While a lot of the credit for it was rightly
given to the government’s decision to protect the domestic industry by imposing
a minimum import price (MIP), anti-dumping duty, etc. on steel imports, an
important factor was also the fact that Chinese steel exports had started
Data sourced from the International Trade
Centre (ITC) reveals that starting January 2017, Chinese steel exports have
been dropping by at least 25% year-on-year every month.
With the Chinese export blitzkrieg of the
previous two years slowing steel prices all over the world recovered from a
slump, giving a much-needed respite to Indian steelmakers too.
China’s apparent steel consumption in the first
six months of the year increased by 9-10%, bringing comfort to the steel
industry, Seshagiri Rao, joint managing director and group CFO of JSW Steel
Ltd, told analysts in August.
“On the top of this, their exports have come
down by 28%,” he added.
What the slowing of Chinese exports also did
for Indian steel makers was open up overseas markets that were until now the
fiefdom of the Chinese.
For instance, while China’s exports to South
Korea—by far its biggest market—dropped over 16% (y-o-y) to just over 3 million
tonnes (mt) in the April-June quarter of 2017, India’s exports to the country
surged by over 20% to 0.63mt.
While China’s exports to Vietnam, similarly,
dropped over 41% (y-o-y) in the April-June quarter of 2017; India’s exports to
the South-east Asian country surged by 329% (y-o-y) during the quarter,
ministry of commerce data shows.
Companies including JSW Steel saw record jumps
in their exports during the first six months of 2017.
The share of exports in JSW Steel’s sales in
the January-March quarter of the year, for instance, jumped threefold from the
year-ago period to 36%, before moderating to 23% in the April-June quarter,
which was still a four percentage points jump from the year-ago period.
The company, however, attributed this more to
poor domestic demand.
An analysis by Mint of steel trade
data since January 2016 also reveals that India’s steel exports are more or
less negatively correlated to China’s exports and its own imports. In other
words, the growth of India’s steel exports are as dependent on a fall in
Chinese steel exports as they are on a fall in India’s own steel imports.
And with India’s imports rising once again on a
year-on-year basis in the last few months, there are chances that the good work
of the first half of 2017 might get undone going forward.
What’s required to stop this from happening,
according to Rao of JSW Steel, is for the government to relook at the safeguard
measures currently in play.
because the anti-dumping duty on steel gets triggered only when the import
price is below $489 per tonne, which is irrelevant at current international
price levels that are significantly higher for most grades.