KOLKATA: The secondary steel sector is apprehensive about the government's proposed move to impose minimum import price (MIP) for steel. While falling steel prices, higher electricity costs, and interest burden are already a drag for smaller mills in the secondary sector, they feel that any plan to bring their raw material under the proposed MIP, will affect them. This could lead to heavy defaults on loans and significant jobs losses, since the sector supports some five million people in terms of direct and indirect employment. As per a steel industry report by Bank of America Merrill Lynch, out of the total Rs 2.8 lakh crore of NPAs in the steel sector, some Rs 1.95 lakh crore is with Tier 2 mills and the unorganized sector.
"While MIP is a good move, we would urge the government to implement it in a rational manner that should not harm the secondary steel sector," Prakash Tatia, chairman of Sponge Iron Manufacturers' Association (SIMA) said. Against installed capacity of 50 mt, domestic sponge iron production has been only around 18 mt with capacity utilisation of only 35% in the last 2-3 years.
While domestic steel industry has overall capacity of 105 million tonne (mt), with a crude steel output of close to 91 mt, around 54% of capacity is in the secondary steel sector, Tier-II and local steel units. To ensure the survival of some 2,000 secondary units which are in operation, government should ensure that iron ore and coal is available on affordable and consistent basis. There should also be a pricing mechanism for these raw materials based on export parity, Tatia said.
Some of the secondary units like, slab re-rollers for instance, use continuously cast slabs, not readily available in the country. Currently, slabs worldwide are available at a very reasonable price range between US$ 220-250 f.o.b (free on board), facilitated by the dip in iron ore, coking coal and scrap prices. These units depend on imports and if a MIP higher that the current import price is imposed on slabs it will deal a vital blow to their raw material costs, the SIMA official said. Incidentally import of slabs accounted for 3 lakh tonne out of India's over-9 mt of steel imports last year.
Another section of the steel user industry expected to be affected if the MIP is not imposed rationally are those who use it for critical applications. These special steels have to be necessarily imported and include clad steel, special grade boiler steel, API high-grade steel for high pressure applications and higher width/thickness requirements as well as special auto grade steel.
Source :economictimes
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