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The staggering 177 percent increase in stainless steel imports over last year’s average (FY21), mostly from China and Indonesia, put the entire industry at risk.
India’s stainless steel sector, the second largest producer and consumer in the world, has a total capacity of over 50 lakh tonnes per year, which is sufficient to meet the total needs of the domestic industry.
Twelve percent of stainless steel is used in construction and infrastructure, 13 percent in automobiles, railways and transport, 30 percent in capital goods and 44 percent in durable goods and household utensils and 1 percent in others. Stainless steel is environmentally friendly (low emission footprints, recyclable, low maintenance, etc.), user-friendly (safe production, inert, fire-resistant, impact-resistant, aesthetic, etc.) and economical ( longer life, lower cycle cost life, higher yields, etc.), which makes it very durable.
In addition, the industry is able to produce all varieties of stainless steel. It has grown at a compound annual growth rate of 8-9% over the past four decades, compared to the global average of 5-6%, according to the Stainless Steel Development Association of India (ISSDA).
Government support measures
The Ministry of Steel has taken several steps to support the Indian stainless steel industry. The industry faced major difficulties when imports crossed the five lakh ton mark in 2015-16 (around 20 percent of annual consumption). To overcome the difficulties, the government took measures such as the imposition of anti-dumping duties (in June 2015), the stainless steel quality order, 2016 (in force from February 2017) and countervailing duties. -CVD (as of September 2017) against imports from China. All of this has helped to drastically reduce Chinese imports. However, the successful growth of the stainless steel industry came to a virtual standstill after the budget announcement of February 1, 2021. In the budget, the countervailing duty on the import of certain stainless steel flat rolled products. hot and cold originating in or exported from China has been temporarily revoked until September 30, 2021. It also announced the revocation of the provisional CVD on the importation of stainless steel flat products originating in or exported from Indonesia.
Flood of imports
The budget decision practically opened the floodgates for imports into the country. In the first four months of this 2021-22 fiscal year (April-July FY 22), there has been a staggering 177% increase in stainless steel imports over last year’s average ( FY21), and a 159% increase from the 2016-17 average, the full base year before China’s countervailing duty was imposed.
The situation became even more critical in July 2021, when China’s share in the overall basket of stainless steel imports rose to 66% and Indonesia’s to 15%, bringing the total imports of these two countries. at 81%. This is a significant jump from FY18, the second half (after CVD), when China’s share was only 27% and Indonesia’s was just 3%.
Capacity utilization
In recent months, the sector’s capacity utilization has fallen to 60 percent, due to dumped imports from China and Chinese-funded industries in Indonesia. And, most of the underutilized capacity is concentrated in the fragmented MSME sector, which contributes almost 28% or 14 lakh tonnes of stainless steel capacity.
Such a drastic reduction in capacity utilization has led many producers to bankruptcy, resulting in high unemployment in the industry, and converted many manufacturers into traders. The various re-roller associations also pointed out that many of their members, who wanted to make further investments in setting up new factories, suspended their investments due to the unfavorable circumstances.
In a letter to the Minister of Finance, the All-India Stainless Steel Cold Rollers Association, a leading body for the production and supply of stainless steel in India, made it clear about its complex situation. “As we recover from Covid, if CVD is not imposed urgently, our MSME members could not hold out, shut down and become traders. We contend that China’s countervailing duty suspension is withdrawn as of October 1, 2021, and that countervailing duties on Indonesia are also imposed, â€the letter said.
Short, medium and long term solution
So what can be done to save the stainless steel industry in the short, medium and long term?
First, the government should withdraw the countervailing duty suspension on China dated September 7, 2017. Second, accept the new final countervailing duty findings on Indonesia, as recommended by the DGTR on January 15, 2021, and collect duties anti-subsidy on imports from Indonesia. .
Since the stainless steel industry is the main target for imports, it needs significant help to create a level playing field at the national level. There is an urgent need to impose trade remedies in ongoing / completed cases where subsidized stainless steel has been proven to be dumped. The much needed government assistance will improve the profitability of domestic producers, which will lead to increased investment in the country and boost the economy. This will result in job creation and will also contribute to the state coffers.
The author is the former president of SAIL
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