Indian steel mills hit by high export tariffs are revamping their product offerings to cater to overseas buyers and protect their sales and profit margins. A supply glut due to a nearly two-week absence of major export orders and weak domestic demand have meant factories have been stocking up for just a month.
Steel companies are investigating bids from Vietnam and the Middle East for alloy hot-rolled coils (HRC) not covered by the tariff, trade sources said business line.
India’s monthly crude steel production is around 10 million tonnes (mt), split between private and PSU players. The country exported 13.5 million tons of finished steel in FY22, up 25 percent from a year earlier. Mills, including PSU major SAIL, are looking into exporting semi-finished products – where no taxes have been collected. Others are looking for special offers like track plates or rail infrastructure that have also escaped the export tax net.
Nearly 95 percent of bids from steel companies reportedly fell in the export tax area.
Speaking on a conference call following the results, Anil Kumar Tulsiani, Executive Director – Finance, SAIL said: “We have specific orders (exports) and are looking at what needs to be done. SAIL does not export much and has an advantage in that it exports semi-finished products (which do not incur export taxes).”
The industry estimates that over 1.4 million export contracts are in limbo because they are not backed by letters of credit. Steel Department officials said these are orders where plants either have contracts in place or received advance payments for future delivery dates. There are no letters of credit against these orders.
Mills have the option of either exporting them at a loss (by paying duty) or getting into a lengthy legal battle over forced cancellation.
Jayant Acharya, JSW Steel’s deputy general manager, said on a conference call with analysts following the results that the steelmaker will pay export duties on ships in transit. Because whatever was declared at the port did not need export duty payment.
“Whatever we have to do with the export duty payment, we will do it under protest. Previous precedent is that (wherever) the letters of credit have been issued and contracts are valid, these are exempt. So that’s the assumption we would pay under protest,” he said.
HRC exports hit
Meanwhile, HRC prices remain under pressure. Buyers are waiting to see whether or not prices have bottomed before deciding to ship. SteelMint’s HRC Export Index for India was quoted at $730/t FOB East Coast on Jun 9; versus $821/t FOB level on May 17th. Export earnings are lower than domestic, with overseas sales remaining slow.
June 09, 2022