NEW DELHI: Steel imports by India are expected to reduce significantly in the first half of FY2017 at least once the impact of the minimum import price(MIP) starts to be felt, according to rating firm ICRA.
MIP did not have a material impact on the extent of steel imports till March 2016, due to a lead time of about one-and-a-half to two months for the shipment to arrive in India and the same led to a growth in monthly steel imports in February and March 2016, ICRA said.
Bulk quantities ordered in anticipation of MIP, just before its imposition, could also be a reason behind the same. However, with the full effect of MIP setting in from April 2016 onwards and given the firm international prices, ICRA believes that steel imports are expected to reduce significantly in the first half of FY2017 at least.
Post the imposition of MIP, domestic hot-rolled coil (HRC) prices have witnessed a sharp increase of about Rs 6500/MT which, when compared with the price differential between import offers and MIP in the first week of February 2016 of USD 130-200/MT is still on the lower side.
However, looking at the demand growth of 4.6% in FY2016 and the overcapacity concerns in the domestic market, price hikes have been significant and have also benefited from the recent spurt in international steel prices.
At current international prices, both safeguard duty(SGD) and MIP are almost equally effective in curbing imports with domestic prices being cheaper than landed prices by about $30/MT for both the cases. Additionally, the extension of SGD up to March 2018, approved by the Government in March 2016, is likely to help flat steel producers even after the expiry of MIP in August 2016.
