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Steel imports from South Korea and Japan increase to fill up the Chinese gap

Jun 21,2019

While the domestic steel demand has shrunk, there has been an increase in steel import, especially from South Korea. There has, however, been a reduction in imports from China, but this has been compensated by increased imports from South Korea and Japan, which have strengthened their grip on the Indian steel market.


The Indian domestic steel industry has asked for safeguard duty on steel imports, even as the issue of imports came up for extensive discussion between Piyush Goyal Union Commerce Minister and Dharmendra Pradhan Steel Minister last week.


Domestic steel consumption growth eased to 7.5 percent in 2018-19 (FY19), from 7.9 percent in 2017-18 (FY18) due to liquidity- and fuel price-related headwinds faced by the auto sector during the second half.


Demand growth moderated further to 6.4 percent in April 2019 and is likely to remain lower than the FY19 levels in the first quarter (Q1) ending June 2019, due to continued weakness in the auto sector and reduced construction-related activities during the general election period. This, coupled with elevated coking coal prices, is likely to affect the financial performance of domestic steelmakers in Q1, said a recent Icra report.


In FY19, India’s imports from Korea increased to $2.7 billion, from $2.3 billion in the previous year. Similarly, steel imports from Japan increased to $1.3 billion, from $1.1 billion in FY18. Imports from China, however, fell to $1.4 billion in FY19, from $1.6 billion.


Provisional figures for April 2019 showed Japan and South Korea supplied 57 percent of India’s 630,000 tonnes of steel imports, compared with about 45 percent in the same month a year ago.


Officials said free trade agreements with South Korea and Japan are leading to an increase in imports. Steel imports from Japan in April jumped 27 percent to 116,000 tonnes, from the same month a year ago, while Korean imports rose 15 percent to 245,000 tonnes.


With the US and Europe clamping down on steel imports from the two countries, they are looking to further increase imports into India. These imports are primarily high-value steel used for specialized purposes like automobiles.


According to the Icra report, given that domestic steel hot-rolled coil prices have weakened sequentially from Rs 41,250 per million tonnes in the fourth quarter of FY19 to Rs 40,500 per million tonnes in Q1 of 2019-20 (FY20), elevated coking coal prices are likely to keep the profitability of domestic blast furnace operators under pressure in the current quarter.


Jayanta Roy, senior vice-president & group head, corporate sector ratings, Icra, said the softening demand and a 34 percent dip in steel exports kept the domestic crude steel production growth low at 3.3 percent in FY19. While steel imports grew 4.7 percent in FY19 and kept India a net importer of steel during that year, imports are expected to go down in the coming months, as the domestic hot-rolled coil prices are currently trading at a 6 percent discount to imported offers.


Despite expectations of reduced imports, domestic steel production growth is likely to remain modest in the second quarter of FY20 due to the seasonal weakness in demand and would recover in the second half of FY20, mirroring steel consumption trends.