India to cut export rebates for steel
Indian authorities have decided to slash export rebates, in a move which market participants expect will raise prices for steel shipped out of the South Asian nation, Fastmarkets understands.
An Indian steel trader told Fastmarkets that a final decision on the matter was still under discussion, but he expected that the rebate he received on steel exports would be cut from a current 2.5-3% per transaction down to 1.5% per deal.
India’s Directorate General of Foreign Trade (DGFT) announced on September 2 that it has imposed a limit on the amount of rebate than can be given to exporters under the Merchandise Exports from India Scheme (MEIS).
In the period from September 1-December 31, 2020, each Indian exporter can claim no more than Rs 20 million ($273,285) in rebates from the government.
After the end of the year, the scheme will be replaced by the Remission of Duties or Taxes On Export Product (RoDTEP), which has been designed to comply with WTO guidelines. The United States had previously won a WTO challenge against India’s MEIS system, with the US saying that it provided an unfair competitive advantage to Indian companies.
Based on this news, a Shanghai-based trader said he believes that a major Indian steel mill will have to raise its hot-rolled coil (HRC) offer price to Vietnam by at least $5 per tonne.
Earlier this week, the mill was offering around $540 per tonne cfr Vietnam for HRC of rerolling grade, while Vietnam buyers would accept $525-530 per tonne cfr Vietnam at the most.
Indian steel has flooded into global markets this year amid low domestic demand in the South Asian country and pockets of unmet demand in areas of limited steel output due to Covid-19 restrictions.
For example, exports from Indian state-owned mill Sail in August amounted to 109,400 tonnes, up 250% year on year compared with August 2019.
But stronger flat steel demand in the last month, partially due to relaxed Covid-19 restrictions in the country, has led to mills selling more material into the local market and relying less on exports.