India seems to have turned a favourite dumping ground for steel makers from not just China but also Japan and South Korea, which are diverting supplies from the US and the European Union in massive volumes to beat the impact of a global tariff war initiated by the Trump administration.
Official data suggest steel supplies from China, the world’s largest steel producer, surged to 3,62,000 tonnes in the April-June period, up as much as 67% sequentially from 2,17,000 tonnes in the previous quarter, even though our overall merchandise imports from the second-largest economy faltered.
Similarly, steel imports from Japan and Korea jumped 47% and 35%, respectively, to 3,74,000 tonnes and 7,46,000 tonnes in the June quarter, against supplies in the previous three months, according to a note prepared by the steel ministry.
Industry sources said domestic price for HR coil, a key product, at $675 per tonne is higher than the landed cost of imports from these countries. Including 12.5% customs duty and freight, HRC from China is now available to Indian buyers at $672/tonne. Since Japan and Korea enjoy duty reliefs under India’s Free Trade Agreements with them, the imports from these countrues are 10% cheaper than domestic steel; the post-Trump-tariffs situation has led to imports from these countries to accelerate further.
Importantly, while the combined steel exports by China, Japan and South Korea to the US dropped 17%, or by 2,41,000 tonnes, in the April-June period vis-à-vis the previous quarter, their supplies to India rose by 4,59,000 tonnes, up 45% from the March quarter. This suggests these Asian steel-makers are diverting supplies to India that were earlier meant for not just the US but other destinations as well, including the EU, that has already initiated plans to put safeguard measures in place to tightened flows of cheap imports from Asian rivals to protect domestic industry.
The dumping raises fears that after becoming a net exporter of steel for two straight years, supported ably by government policies, India could again turn a net importer in 2018-19.
The Trump administration announced in March its decision to slap an extra 25% duty on steel supplies from select countries, China, Japan, Korea and India, plunging major producers into a crisis and prompting them to redraw their traditional export strategy.
The steel ministry is undertaking an exercise, at the behest of the commerce ministry, to see if it makes sense for India to lower the volume of its supplies to the US to be able to extract a waiver for New Delhi from Washington’s extra levy on the metal.
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. India is already witnessing the negative impact of its trade agreements with Japan, Korea and Asean, with New Delhi having incurred a steel trade deficit of 1.18 million with Japan and 2.51 million tonnes against Korea. “Without any FTA, India has a trade deficit (in steel) of two million tonnes with China and considering the trend, it’s imperative that pursuant to signing of RCEP, the trade deficit will further widen,” the steel ministry said in a note. India steel trade deficit with China was as high as over 4 million tonnes in 2015-16. In fact, the ministry dreads the prospect of dumping if China were to be granted unrestricted market access in steel through the RCEP agreement.
The industry believes that our Comprehensive Economic Partnership Agreement (CEPA) with Japan and Korea has already hurt us. Korea’s share in India’s steel imports jumped to 30% in the last fiscal from 15% in 2009-10, before the CEPA was implemented. Similarly, Japan’s share in our finished steel imports grew from 8% in 2009-10 (before the CEPA came into effect) to 24% in 2013-14 before coming down to 14% in 2017-18.
When contacted, Seshagiri Rao, joint managing director at JSW Steel, said India may have to bear the brunt of the entire trade diversion due to the extra US duty. “Diversion might take place to India for those products earlier meant for the European Union. We have to act expeditiously to protect our domestic market,” he said.
Rao said India should slap safeguard duties – a tool that be employed when imports see sudden surge – on steel from China, Korea and Japan and try to exclude steel from FTAs with Japan and Korea. “Custom duty should be doubled to 25% from 12.5% now. We also need to raise anti-dumping reference prices by $150-200 per tonne for various products,” he said.
A questionnaire sent to Indian Steel Association secretary general Bhaskar Chatterjee on Thursday remained unanswered until the paper went to press on Sunday.
For its part, the steel ministry is opposing a plan being deliberated by potential RCEP members to consider 2012-13 as the base year for various negotiations on the metal, arguing it doesn’t capture the volatility in the market that prevailed from 2014 to 2017. Simialry, it rejects the idea of taking the base rate prevailed on January 1, 2014 to start tariff elimination or reduction on steel; instead it suggested that the base rate be the highest tariff rate in the past five years. Additionally, the ministry wants that import duty on raw matrials of a steel product that are in short supply be scrapped by the government first if India will commit to a reduction of elimination of duty on the finished product at RCEP.
“Import tariff should be reduced or made zero on steel products which are currently not produced domestically and it would take a long time for setting up their manufacturing capacity in the country,” the steel ministry said in the note.