Alloy steel: Increase in customs duties at the exit

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AAlloy steel (including stainless steel) is steel which is produced with the intended amount of one or more alloying elements in proportions specified to impart specific physical, mechanical, metallurgical and electrical properties. Common alloying elements are manganese, silicon, nickel, lead, copper, chromium, tungsten, molybdenum, niobium and vanadium, etc.

Common examples of alloy steel are stainless steel, silicon electric steel, and high speed steel.

Stainless steel contains primarily chromium (normally more than 10.5% with or without nickel or other alloying elements). As the name suggests, stainless steel resists stains or corrosion and maintains its resistance at high temperatures. This type of steel is widely used in utensils, architectures and in industrial applications namely automotive and food processing products as well as medical and healthcare equipment.

Commonly used stainless steel (SS) grades

Type 304

Chromium – Nickel Austenitic stainless steel makes up more than half of the stainless steel produced in the world. 18: 8 Stainless steel used for utensils is the most common example.

Type 316

Chromium-Nickel (Austenitic) SS containing 2-3% Molybdenum, intended for specific industrial use.

Type410

Raw chrome (martensitic) SS with exceptional strength. It is an inexpensive, heat-treatable quality suitable for non-corrosive applications

Type 430

Raw chrome (ferritic) SS, providing general purpose corrosion resistance, often in decorative applications

Type 201/202 etc.

Low nickel austenitic SS containing 2-5% nickel. Used as a cheaper substitute for Type 304 grade for the production of utensils

Silicon Electrical steel typically contains 0.6 to 6% silicon and exhibits certain magnetic properties, which makes it suitable for use in transformers, generators, and electric motors.

Categories of Silicon – Electric steel

CRGO

Cold rolled silicon-electric steel sheet / strip, normally recommended for use in transformers and generators

CRNO / CRNGO

Grain free silicon cold rolled electrical steel sheet / strip, normally recommended for use in rotating machinery such as electric motors

High speed steel contains tungsten, vanadium, chromium, cobalt and other metals. It is used for the manufacture of cutting tools.

Alloy steel accounts for only about 10% of the total annual steel production in terms of quantity, its share is about 20% in terms of value since the products are substantially value-added for specific end users.

However, during the period from April to January 2012, the salable production of alloy steel was about 7% of the total finished steel production, the apparent consumption is about 7% of the total steel consumption, the Imports account for about 22% of total steel imports while exports represent about 10% of total steel exports.

According to data from the Joint Plant Committee, alloy steel production in the ten months ended fiscal 2012 increased 17% to 4,406 thousand metric tons year-on-year. But due to an internal consumption of 277 thousand tons, the salable production of alloy steel improved by 19% to 4,129 thousand metric tons.

Imports of alloy steel increased 65% to 1,228,000 metric tonnes while exports were flat at 334,000 metric tonnes. Thus, the availability increased by 30% and the apparent consumption increased by 35% to 3,950 thousand metric tons.

The tariff on the import of alloy steel into India, until some time ago, was 50% higher than that on merchant steel products. Alloy steel was more on par with automotive components where import duties are much higher at 10%. However, unlike the previous standard, all grades of steel are now subject to a basic import duty anomaly of 5%, which is disadvantageous for the alloy steel industry.

The growth of alloy steel depends mainly on the development of the automotive industry and automotive components. Between 2004-05 and 2007-08, the demand for alloy steel increased by 15% per year. This encouraged the existing alloy steel units to undertake substantial expansion and several new players also entered the industry. As a result, production capacity increased from 6.5 million tonnes (mt) to around 11.0 mt between 2007-08 and 2010-11. But, due to the global economic downturn in 2008-09, the Alloy steel has been severely affected, resulting in capacity underutilization which is only around 58-60% compared to 80-85% for general steel.

In addition, the nickel required for the production of alloy / stain resistant steels is not locally available. The most common stainless steels contain 8-10% nickel, 18% chromium and the rest of the iron. The current tariff on the three categories of nickel, namely raw nickel, nickel oxide and ferro-nickel, is 2.5%.

Industry expectations

Import duties on alloy and stainless steel

Sr. No.

Item

HSN No.

Current service rate%

% of rights proposed 2012-2013

1

Hot rolled bars and rods in irregularly wound stainless steel coils

7221

5

7.5

2

Other stainless steel bars and rods; angles, shapes and sections in stainless steel

7222

5

7.5

3

Hot-rolled bars and rods in irregularly wound coils of other alloy steels

7227

5

7.5

4

Other bars and rods of other alloy steel; angles, shapes and sections of other alloy steels; Hollow drill bars and rods, of alloy or non-alloy steel

7228

5

7.5

Import duties on inputs for the manufacture of stainless steel

Sr. No.

Item

HSN No.

Current law% 2011-12

% of rights proposed 2012-2013

1

Raw nickel, Unalloyed nickel

7502.1

2.5

None

2

Nickel Oxide Sinter and Other Nickel Intermediates

7501.2

2.5

None

3

Ferro-nickel

7202.6

2.5

None

Association of Alloy Steel Producers ?? representative of the alloy and stainless steels sector (long products) of the steel industry recommends the following proposals for the 2012-2013 budget

Increase the basic tariff from the existing 5% to at least 7.50% (otherwise 10%).

Reduce tariffs on the three forms of nickel (raw nickel, nickel oxide and ferro-nickel) in existing form from 2.5% to 0%.

Actions to watch: Adhunik Metaliks, Bhushan Power & Steel, Jai Balaji Industries, Jindal steel, Jayaswal Neco, Mukand steel.

Analyst expectations:

The government is less likely to increase basic tariffs from 5% to 7.5%. India is one of the fastest growing markets for stainless steel and alloy steel, and will continue to be so over the medium term.

Outlook

The increase in import duties for alloy steel from 5% to 7.5% will have a double benefit for national players (a) better price realizations based on the higher cost of imports on land and (b ) an increase in the use of national production capacities. Likewise, if we lower customs duties on inputs including three categories of Nickel by 2.5% in Nile, this would improve the margins of national players. It remains to be seen whether the Union’s 2012-13 I budget will add even more sparkle to India’s alloy / stainless steel sector.

The various upcoming transportation and infrastructure projects can add luster to the domestic alloy steel, including the demand for stainless steel. As a result, domestic demand for alloy steel may grow at a CAGR of around 8.1% between FY 2011 and FY 2013. But the 2012-2013 EU budget is unlikely to directly benefit the industry. alloy steel.

Balance sheet for alloy steel

April-Jan’12

April-Jan’11

Var. (%)

SAIL (Main Producer)

223

232

-4

JSWL (major producer)

762

360

112

Others

3421

3151

9

Total production

4406

3743

18

Less: IPT / own consumption

277

296

-6

Total production for sale

4129

3470

19

Imports

1228

743

65

Exports

334

335

0

Availablity

5023

3878

30

Inventory change

2

6

-67

Apparent consumption

3950

2918

35

Number in thousands of metric tons

Source: Joint Plants Committee

Union Budget 2012-2013: Full coverage

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