India protects small steel consumers with preferential steel pricing as safeguard duty looms
India’s MSMEs will get preferential price treatment from larger steel mills – or integrated steel producers, which basically works out as lower prices; thus, shielding the former from the impact of rising domestic prices in the event safeguard duties are imposed on the alloys imported.
The step takes India one step closer to implementation of safeguard duties, a matter currently pending with the Finance Ministry, sources in the know said.
Large players
Four of the largest private steel mills – that include Tata Steel, JSW Steel, Jindal Steel and Power Ltd and AMNS India – and the two PSU-majors – SAIL and Rashtriya Ispat Nigam Ltd (RINL) – have agreed to “export parity price” for the micro, small and medium enterprises of the country, documents reviewed by businessline show.
The different prices have been worked out and presented to trade bodies, based on which offers will be made & prices negotiated. New prices come into effect retrospectively, beginning March, documents show.
In technical parlance, Export Parity Pricing, refers to the price a steel producer can expect to receive for its exported products, calculated by subtracting the costs of transporting and exporting the metal from the international market price (Freight on Board).
India’s DGTR has already recommended a 12–15 per cent safeguard duty for imports, with price curbs in place. Implementation decision has to be taken by the FinMin. The country is a net importer of the metal.
Preferential Pricing Strategy
“Generally, we will be offering prices at a discount to MSMEs. But, since prices are depressed now, we will stick to current market prices (domestic). In the event, prices move up in India, we provide export parity price which is lower than the going market price,” an official of one of the major Indian ISPs explained.
One of the trade bodies in a mail to its members said, “….MSME units can now procure steel at export parity prices …”
At present, India’s HRC steel prices are hovering in the ₹49,000–50,000 per tonne range, as per market sources; with export offers to ME & South East Asia being in the $495-500 per tonne range
Discussions to protect MSMEs, in the wake of rise in price of the metal if safeguard duties were imposed on imports have been ongoing since February.
Curbs on Imports
India’s steel makers – through the producer association, Indian Steel Association – sought curb on imports, specially from China and some other FTA countries, as it was impacting their profitability and stretching their margins. Trump tariffs, which could possibly lead to a supply glut, further exacerbated the situation. Mills were cutting back on production to shore up domestic prices.
On the other hand, MSMEs through organisations like EEPC were against a safeguard duty, unless their price offers were protected. The latter argued, post safeguards, larger steel mills would increase prices “unchecked”. Steel is a deregulated sector in the country.
“So the middle path decided upon across meeting with Ministry of Commerce and other line Ministries like Steel was export price parity be brought in; and then this would make it possible to explore imposition of safeguard duties,” an official in the know said.
Steel and Finance Ministries are yet to respond to queries by businessline.
