India’s steelmakers concerned over lack of ministry backing
Private sector steelmakers in India have told Steel First of their deepening concerns about the country’s national steel ministry, even though forecasts predict growth in the sector this year.
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Speaking to Steel First, manufacturers accused the steel ministry of failing to adequately protect their interests, as India’s general election approaches.
“We don’t require any enemy outside because steel ministry is doing all the needful,” said one senior executive of a major private steelmaker in west India.
While requesting anonymity, the manager told Steel First that industry insiders had been particularly upset by January’s decision by the finance ministry to impose a 5% export duty on iron ore pellets – for which the steel ministry got the blame.
“When there is sluggish demand in the country – why restrict the export of this value added product,” argued the executive, who said that five pellet plants had since stopped production.
Disquiet in the Indian steel industry at the current Congress government has been rumbling since manufacturers criticised free-trade agreements with South Korea in 2009 and Japan in 2011, which allowed duty-free imports of steel.
Industrialists also resent an alleged lack of natural gas availability for steel units, with supplies being focused on power generators.
India’s steel ministry did not respond to queries from Steel First about the criticism.
However, defenders for the steel ministry and the government, which faces a tough general election staged from April 7 to May 12, have claimed the country’s steel sector has not effectively lobbied policymakers.
“If the government has been lacking, the industry should also share equal responsibility,” said Sushim Banerjee, director general of the Institute of Steel Development & Growth, based in Kolkata.
“Why did the industry not respond when the drafts of those agreements were circulated?” he said.
In February, a report by the Gurgaon-based ICRA Industry Research Service predicted that the profitability of India’s steel industry is likely to improve.
“Outlook on the profitability of Indian steel players has improved, given the soft price trends of key raw materials,” the report said.
“Price hikes announced by the industry in the current calendar year should also help, provided a weak steel market can absorb such a price hike,” it continued.
“Coking coal prices have softened, the [Indian] rupee has remained steady despite concerns and, therefore, most of the players will register some improvement in their margins over previous quarters,” one of the report’s authors, Priyesh Ruparelia, told Steel First.
According to Banerjee, the last quarter of any financial year in India (January to March), is usually beneficial to the country’s steel producers as government departments try to exhaust spending budgets, which can include funding infrastructure projects that require steel as well as direct subsidies for the sector.
However, Banerjee said this year’s general election could stifle such spending.
“The finance minister has put a cap on government expenditure to show a better fiscal deficit position,” he said. “As a result, steel consumption growth for the whole financial year ending March 2014 may be just 2-3%, which will be the lowest in the past decade.”
Banerjee added that the fragile state of the overall Indian economy was also a problem, with – according to Ruparelia – the construction industry accounting for 60% of total steel consumption in India.
“The current status of steel industry [is like the] economic condition of the country, which is precarious,” added Banerjee.