The Metallurgy Industry is the derivation of many products. Raw materials are being processed and used by numerous industries, such as automotive, construction and infrastructure. That makes it an important supplier in the Indian economy.
India is surging ahead to become the 2nd largest crude steel producer within the coming year. Its production capabilities are expected to reach 275 million tons for crude steel in the next decade. Steel exports were also growing at a CAGR of 11.32% in the last 4 years of 2011-2015. Due to investments from steel companies, the steel market in India is expected to grow at a three year CAGR of 8.8% by 2016 to a capacity of 125 MT. An increase in demand for steel is also forecasted, which would boost the iron ore sector. In addition, the Mining Industry is optimistically looking ahead to the future, as the government recently altered the Mines and Minerals Development and Regulation Act (MMDR) of 2015 which will allow captive mines to be transferred to a company’s acquirer at a fee that is not specified yet. This was forbidden before, as under the initial act, leases for mines could only be acquired through auction, and only mines bought through a competitive bid were able to be re-leased in a M&A. So if a company wanted to acquire another, it would have to face a complicated process in the mine’s transfer, which made several M&As being put on hold for a while.
Still, the Steel Industry faced some problems recently due to foreign competition. So how can the domestic producers being helped to face competition from China and others?
India currently faces the problem in the Steel Industry, as competitors from various countries like China, Japan and Korea, export a large amount of steel at cheaper conditions to India. This generates a big import surplus for steel products and brings domestic companies into troubles. China is the biggest steel producer worldwide. Its exports in steel are 25% larger than India’s whole steel production.
To do something about that, three Indian steel companies approached the Directorate General of Anti-Dumping and Allied Duties with a complaint regarding Chinese products. They seek anti-dumping investigation for China as well as an investigation of current tariffs for products coming from overall six countries. Products covered by the probe are hot-rolled flat products of alloy or non-alloy steel being in coils and not being in coils.
After the complaint and followed considerations of the agency, the DGAD has decided to follow the complaint and start investigations in the middle of last year. It found first evidence of dumping of products from China, Japan, Russia, Brazil, Korea and Indonesia. If the investigation concludes positively, the agency then will suggest a minimum duty amount to the Ministry of Finance, which will then take the final decision.
But this pledge was not the first cry for help in the industry. In an earlier attempt to create a more competitive environment, the Indian Government had set Minimum Import Prices on some steel and iron products in the range of $340-750 per metric ton. Furthermore, some safeguard-duties were set in place, ranging from 10-20%. These safeguard import taxes have recently been extended until 2018. Additionally, the Steel Ministry wants to pitch for a fund under the National Investment and Infrastructure Fund (NIIF). This fund should help to reduce capital costs of steel manufacturers and support capacity creation o that the industry can achieve its 2025 production goal of 300 million tonnes per year. The change to the MMDR is also seen as a help for the Steel Industry, as more consolidations are now possible also by medium and small players.
The per capita steel consumption is still relatively low compared to the rest of the world, which leaves room for improvement (60 kg compared to 222 kg average worldwide in FY15). The country’s strategic location makes it suitable for exports to many countries. Therefore, India is an interesting country for companies who plan to invest in the Metallurgical sector, as India has large plans to improve the country with projects in which Metallurgy would play an important role to supply products.
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