A surge in cheap steel imports into India is forcing many smaller mills to either cut production or close their units, threatening the country’s goal of expanding capacity, a top government official said.
About 150 mills have stopped operations, while another 50 have reduced output as local steel prices hover near five-year lows, Steel Ministry Secretary Sandeep Poundrik said at an industry conference in New Delhi on Tuesday. Almost half of India’s steel output flows from hundreds of small and medium enterprises, now under strain due to low prices, he said.
“All players are facing problems,” Poundrik said. Pricing pressures have also reduced the profit margins of big players like JSW Steel Ltd., he said, adding that the government was ramping up quality checks to stem the inflow of substandard products.
Steel consumption is ballooning across the South Asian nation, driven by rapid infrastructure build out and economic expansion, creating what should be a golden opportunity for domestic players. However, the booming demand has attracted a flood of cheaper imports from Chinese mills, seeking overseas markets as their home economy faces a supply glut.
“Price is a problem when we need to invest in 100 million tons of capacity,” he said, adding that such expansions would mean investment of about $100 billion. He questioned how such funding would be possible if prices remain low.
India, the world’s second-biggest steelmaker, has joined countries across Asia, Europe and Latin America to impose trade curbs on steel. It currently slaps a 12% temporary safeguard duty on a broad range of steel products to shield domestic manufacturers from low-priced imports, particularly from China.
The levy is due to expire this week, with no decision yet on whether it will be renewed. The country’s trade authority has recommended a three-year extension.
(Reporting by Preeti Soni. With assistance from Katharine Gemmell.)
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