Steel trade: Data variations need to be looked into for precise result

Posted on 02 January 2018

Source: Financial Express

As the year 2017 has completed it journey, WSA has come out with the latest report on indirect trade in steel. The report, which is a continuation of methodology and data adopted by WSA uniformly for all the countries, compiles 2016 data for 74 countries. Credit goes to WSA team for attempting this method of compiling yearwise indirect export and import of steel-containing goods in 74 countries since 2006. The primary source of export and import data on steel and indirect export and import of steel containing goods of chosen 6 products is UN Commodity Trade Statistics (UN Comtrade) database for 200 countries updated each year. It has been acknowledged by WSA that trade data for some countries are available in value terms and not in volume and some countries do not report yearly data. In both these cases WSA adopts estimation based on past trend and other available documents. The 6 steel-containing products chosen are: metal products (HS Code: 73/84/86 describing boilers, metal furniture, cans, wire based metal goods), mechanical machinery (HS Code: 84 describing machine tools, mechanical handling equipment, machinery & equipment, pumps, agricultural equipment, tractors), electrical equipment (HS Code: 85), domestic appliances (HS Code: 84/85), automotive (HS Code: 84/87) and other transport (HS Code:84/86/87 describing Rly Rolling Stock, Ships, Aircrafts). The commodity break-up has been done up to 6-digit HS Code classification. Steel coefficients of these product categories are determined by the steel content in volume to produce 1 tonne of the finished product. For most of the products these are less than one, barring boilers, cans, wire based metal goods, fork lift trucks, among others, where this ratio is more than one.

One common coefficient across the countries for each steel-containing goods for each 6-digit HS Code has been assumed for all the years based on an expert survey conducted in 2011. This is a restrictive assumption and as a result the findings of the annual exercise on indirect trade in steel can at best be taken as indicative in terms of magnitude and trends, however, the reports show interesting and meaningful results. The value of this report pertains to the realisation that the country exporting a large quantity of steel-containing goods has already reported this in its delivery figures (delivery plus direct net exports equals apparent consumption) and therefore out of ASU figures the net indirect exports (indirect export minus indirect imports) need to be deducted to arrive at true steel use (TSU) in the country.

This implies that indirect net steel exporters have TSU lower than reported ASU. For instance, as per WSA, the ASU of China in 2016 was 681 MT and after taking into account the indirect net exports of steel, the TSU of China comes to 620.5 MT. Thus, the real domestic absorption of steel in China is around 61 MT lower than what was reported as apparent steel use. For all indirect net exporters of steel like Germany, South Korea, Japan and the US, the TSU is lower than the reported ASU. Similarly, for countries being indirect net steel importers like France, the UK, Russia, Brazil, the reverse is true.

As India is a marginally net indirect steel exporter, the apparent steel use in 2016 at 83.5 MT reaches only 84.4 MT as TSU. Indian data on steel exports and imports compiled by UN Comtrade varies widely from the figures compiled by JPC which in turn varies from DGCIS data that is accepted by WTO for all investigations under trade measures. For instance, total steel export from India in 2016 (calendar year) as per JPC was 7.087 MT, while WSA compilation puts it at 10.3 MT. Total steel import reported by JPC in 2016 was 9.24 MT, while according to WSA, this was 9.9 MT. It is interesting to note that JPC reports miscellaneous steel exports and imports data. If we assume miscellaneous steel describes steel-containing goods, and add these data to total steel export and import figures, we may arrive at total direct and indirect exports and imports of steel figures for India. Accordingly, JPC data for 2016 denotes total direct and indirect steel exports and imports at 8.5 MT and 10.6 MT, respectively as against the reported figure of 15.3 MT and 15.8 MT, respectively by WSA.

JPC also reports export and import of fittings in addition to miscellaneous steel data. Even including the figures of fittings import and export, the variations between two sets of data continue to be significant. It is imperative that data variations need to be looked into by converging on the sources and calculating realistic steel coefficients in various steel-containing goods. As the concept of true use of steel indicates the real absorption capabilities of the domestic market, the relevant data on indirect steel export and import must be compiled indigenously on a regular basis. It would also help monitoring the export and import of steel containing goods and advise the government for appropriate policy measures for the benefit of Indian steel industry. 

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