Comparative Data from India

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Competition from Association of Southeast Asian  Nations  (ASEAN) and free trade agreement (FTA) countries, particularly cheap imports from Chinese manufacturers, is putting pressure on the price of steel globally. In India, manufacturers have cut their prices as much as 7-10% below their production costs. Stainless steel imports  in  India increased by almost 38% between April   to   December  2014,    and much of  this can  be  attributed to manufacturers in ASEAN countries. Jindal Stainless reports  that China alone accounts for almost 35% of the increase, with projections for further imports in the last quarter of 2015 being as high as 100  000  to 150 000  tonnes. The Indian Stainless Steel Development Association (ISSDA) estimates India’s  annual stainless steel consumption to be 2.7 million tonnes.

Increased Global demand and offset by Inreased Production 

While  India has increased its production capacity to 5 million tonnes over four years (up from 3.5 million tonnes), China has increased its production  capacity  from 7  to 17 million tonnes, making it far and away the world’s largest producer of stainless steel. Unsurprisingly,  China is also the world’s largest exporter.

According to the Delhi Stainless Steel Trade Association, the country’s capacity utilisation for stainless steel production  has  dropped  to  55% from 65–70% a year ago – between 2.6 million to 2.7 million tonnes, with further decreases possible. It has also resulted in weaker domestic demand—  ISSDA estimates that  India  now imports 40% of its stainless steel.

Calls For An inquiry Amid Claims of Unfair business practices

Both India  and  the European Union have launched probes into  stainless steel imports from China, with the EU also investigating imports from Taiwan. The    Comprehensive Economic Cooperation Agreement (CECA) that India  has signed allows  Vietnamese and Malaysian   manufacturers who import  stainless steel to  forego  the 7.5% import duty, so long as they can show that the value of the steel has increased 35% as a result of their use of the material.

However,  ISSDA is  concerned about  how  the  companies  account for this mandatory value addition, as there is little evidence that stainless steel manufacturers in these countries have the facilities required for hot- rolling. According to figures obtained from  MEPS Stainless Steel  Review, importing hot-rolled sheet to convert to cold-rolled adds no more than 10% to 15% in value.

As a  result, ISSDA said in a statement, they believe “some foreign companies are furnishing Preferential Certificates of Origins to convince custom authorities in  the country of import that the material has originated in the country of export.”

The Indian ministry of Commerce and Industry has launched an investigation into the impact of Chinese imports as the result of pressure from  the  local  stainless steel industry.

ISSDA also believes Chinese manufacturers have  access to cheaper raw materials, such as ferrochrome, with  claims that the Chinese government subsidises electricity and working capital loan interest.

However,  manufacturers in other industries oppose such an inquiry, fearing that they will lose their access to cheaper materials, thereby threatening their position in the export market where they face competition from other countries, including China.

With  the  Process Plant & Machinery Association of India (PPMAI)   disputing    the    claims by  ISSDA and  Jindal  Stainless, the result of the government investigation is far from clear, but it could have a far-reaching effect on one of the world’s largest producers of stainless steel.

The Indian government has reasons to want to avoid an overly confrontational attitude, as India and    ASEAN   countries   signed an FTA  agreement in  2009.  The ministry has said that it hopes the value of this agreement, in the form of  services and  investments, will increase to $100  billion  from its current level of $80  billion,  from July 2015 onwards.

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