The definitive anti-dumping (ADD) duties imposed on import of hot-rolled (HR) and cold-rolled (CR) flat steel products are likely to create a more stable operating environment for domestic flat steel players, ICRA said today.
With a view to protect the domestic flat steel manufacturers, the government recently imposed a five-year definitive anti-dumping (ADD) duties on import of HR and CR flat steel products.
"The long tenure of ADD regime is likely to create a more stable operating environment for domestic flat steel players," the rating agency said in a statement.
The definitive ADD has been fixed at a level which is the difference between the product's landed value and a given threshold (fixed at USD 489/MT for HR coils, USD 561/MT for HR plates/sheets, and USD 576/MT for CR coils).
"This is expected to prevent the landed cost of imported flat steel from falling below this threshold, thereby protecting domestic players from the volatility in international steel prices to an extent," it added.
During 2015-16, domestic steel players were at the receiving end due to cheaper imports from countries like China, South Korea, Japan, Russia and Ukraine.
Jayanta Roy, Senior Vice President and Group Head, Corporate Sector Ratings at ICRA, said: "Flat steel products covered under the ADD regime had contributed around 60 per cent to India's cumulative steel imports between FY2015 and FY2017 and, therefore, the current measure is expected to keep India's steel imports under check in coming years."
Global trade action on dumping of steel has been led by the European Union (EU) and the US, both countries putting in place import barriers on multiple steel products not only from China, but also from many South-East Asian countries, including Japan and South-Korea.
Indian steel makers have generally not been at the receiving end of these measures thus far, which presents opportunities for domestic mills to increase their market share globally, especially in the EU region, which remains India's largest destination for steel exports.
However, Roy added, "There is significant overcapacity in the global steel industry, and any softening of international prices like in the recent past may affect domestic prices too, if exports are non-remunerative, leading to price-based competition in India, especially given the slackness in domestic demand."
The Union Cabinet on May 3, 2017, cleared the National Steel Policy (NSP) 2017, which aims at increasing the crude steel capacity to 300 MT by 2030-2031 from the current capacity of 128 MT, ICRA said.
"Given the weak financial health of many domestic steel players, this seems a tall order. In this context, the definitive ADD and the government's efforts towards sorting out of stressed assets assume significance, since, in the current scenario, lenders may not have the appetite to extend fresh funds to the stressed steel sector players," it added.
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