Strong rupee and stiff competition from China affect steel export

MUMBAI: Indian steelmakers, who found a strong exportmarket last year to offload their produce in the wake of weak domestic demand, are unable to do so this year, hurt by a stronger Indian rupee, higher competition from China and rising input costs domestically.

JSW Steel reported a 6% drop in exports in the second quarter. Privately-owned Essar Steel told ET that sales contribution from exports have come down from 25% last year to 20% in the latest quarter, without specifying an exact drop.

JSW Steel, in its latest conference call with reporters, said there has been a 'dramatic change' in the global market with China aggressively pushing its produce globally. Chinese steel sales are not only affecting JSW Steel globally but also domestically. It was forced to cut steel prices recently to compete with cheap Chinese products flooding the market.

"Growth in exports have declined. It is not the same as last year," said Shivramkrishnan, Chief Commercial Officer, Essar Steel. "Steel production in the country has been impacted due to non-availability of iron ore and gas. Gas allocation to steel plants has been reduced by the government. Steel industry has been let down."

Even though Indian iron-ore prices are lower than global ironore even now, the gap between them is rapidly narrowing with global prices sliding and Indian iron-ore prices remaining either stagnant or rising, making Indian steelmakers less competitive in the global market. The contrariness of iron ore prices in India is because several iron ore mines in India are not functioning in the aftermath of the mining scam. price was a competitive advantage for Indian steelmakers. This advantage is melting away," said Anjani Agrawal, India Mining & Metals Leader at consultancy firm EY. "If domestic iron ore prices had fallen in line with global price fall then India would have sustained the advantage."

China is offloading much more in the global market this year compared with last, as its domestic demand is faltering. Chinese government also gives several export incentives to its steelmakers. With stronger rupee and stiff competition from China, Indian steelmakers are instead focussing more on domestic demand. But here too, Chinese imports are making life tough.

Indian steelmakers have spoken to the government about this problem and are hoping for some curbs on Chinese imports. These firms were already suffering due to free trade agreement with Japan and South Korea.






 

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