Revocation of countervailing duties against subsidized Chinese imports of stainless steel will hurt Indian players.
Contradicting all market expectations, the recent Union Budget 2022-2023 revoked certain anti-dumping and countervailing duties on stainless steel and coated steel flat products, alloy steel parts and high speed steel in the public interest, given high metal prices. . Finance Minister Nirmala Sitharaman has also extended the duty exemption on scrap steel for a year to relieve secondary steel producers in medium, small and micro enterprises.
It should be recalled that the decision to impose a countervailing duty on China (September 2017) and provisional duties on Indonesia (October 2020) was based on the recommendations of the Director General of Trade Remedies (DGTR), after a thorough investigation which revealed that the two countries were using non-WTO-compliant subsidies to boost their exports to India and were causing harm to Indian manufacturers.
The continued suspension (China) and withdrawal (Indonesia) of CVDs from these two countries has led to a massive increase in imports. For example, the first nine months of 2021-22 saw a 68% increase in import volumes of flat stainless steel products compared to the average monthly imports over the last fiscal year. Average monthly imports increased from 37,318 tons per month in FY21 to 62,867 tons per month in the current FY22.
The bulk of imports came from China and Indonesia, whose share in overall imports increased by 44% and 103% respectively in the first nine months of this fiscal year compared to the average monthly imports last fiscal year. Today, these two countries account for 68% of total stainless steel flat products imports in the first three quarters of FY22, up from 41% in FY21. increased from 4,301 tons/month in the last fiscal to 15,331 tons/month in the first nine months of this fiscal year, while China’s average monthly exports increased from 11,127 tons/month in the last fiscal year at 27,187 tons/month in the first nine months of this fiscal year.
It should be understood that the reduction of production in China due to pollution control largely applies to carbon steel factories based on blast furnace routes, and Chinese enterprises have the opportunity to transfer exports from Indonesia to maintain their market aggressiveness and global dominance. In addition, WTO non-compliant subsidies ranging from 20-30% to their stainless steel manufacturers are causing material damage and continued financial strains to local businesses.
It is recalled that on the basis of a CVD investigation conducted by the Director General of Antidumping and Similar Duties (DGAD), now DGTR, on subsidized imports of stainless steel products, the Ministry of Finance notified on September 7, 2017 a CVD of 18.95% on import of stainless steel from China for the next five years. Similarly, based on an investigation and subsequent findings by the DGTR on subsidized imports of stainless steel from Indonesia (subsidy on coal, electricity, etc.), the Ministry of Finance in October 2020, had levied the provisional countervailing duty in a range of 22.31% to 24.83% on certain types of flat products. Subsequently, in January 2021, the DGTR recommended a final CVD on Indonesia in the range of 18.83% to 24%.
However, the central government withdrew the provisional CVD on Indonesia and suspended the CVD on China until September 30, as part of the 2021 annual budget. This decision was extended until January 2022. And in the budget Union 22, these have been revoked. There are some serious implications arising from this decision.
First, it has left the Indian market wide open to Indonesian exports under the India-ASEAN Free Trade Agreement and also exposed to dumping by Chinese companies, as already established in the DGTR investigation.
Secondly, as of the total pending remedies initiated, globally, 70% are in China and 50% in Indonesia, the future growth of the Indian steel industry would be largely hampered by uninterrupted import flows. from these two countries.
Third, despite the imposition of the countervailing duty, Chinese and other companies used various methods to circumvent it and continued to dump their products in the Indian market. As a result, industry (about a third of which is MSMEs) has suffered a double whammy: the impact of the Covid-19 lockdown and the surge in imports. There may be no respite from this scenario in the months to come.
Fourth, opposition to the imposition of CVD by a few manufacturers whose business models are based on imported products runs counter to the government’s objective of the Atmanirbhar Bharat and Make in India programs. In a way, this seriously harms the interests of the MSME sector which could otherwise manufacture and supply these items locally.
Furthermore, with the ongoing Russian-Ukrainian crisis, the imposition of a level playing field (trade remedy measures) on stainless steel imports into India becomes all the more critical. As global supply chains to Russia are disrupted, Indian producers may not be able to divert quantities currently sold in the Russian market to other major markets such as the EU and US in trade defense measures (including quantitative restrictions) imposed by these countries. in the Indian market. And now they have excess quantities that they used to export to Russia. The domestic stainless steel market may also be at risk as China and Indonesia (as suppliers) together account for 50% of the stainless steel consumed in Russia and market/chain access blockage of supply will lead them to divert these quantities towards an unprotected market like India. (as they are already blocked in other markets due to punitive trade defense measures).
The opinions expressed above are those of the author.
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