Lack of demand for steel products and restrictions on dumping in the US and European countries have made steel-producing nations such as Russia, China and Korea look to India for offloading their goods.

According to data from the Joint Plant Committee, the official tracker of the iron and steel industry, between April and August, India imported 2,25,000 tonne of steel, more than double the 1,04,000 tonne it did in the same period last year.

Stainless steel cos seek duty relief

Besides dumping, the prices at which imported steel is coming in have put domestic steelmakers at a disadvantage.

Data published by steel, metal and chemicals tracker International Business Information Services shows that in the April to June period, hot-rolled (HR) coils were imported into India for $785 to $981 per tonne and cold-rolled (CR) for $735 to $943. Galvanised steel came in for $783 to $966 per tonne.

Steel companies cut prices

Galvanised, colour-coated and CR steel are products with value addition to HR coils and therefore, are generally priced higher. However, these products are being dumped into India at rates lower than even HR coils. This pricing has sent the domestic steel market into a tizzy.

More India business stories

An analyst from a research firm said due to price fluctuations everyday, customers in western markets are rejecting a lot of orders. "Prices are weakening by the day and that is why customers are refusing to take deliveries. These rejected products are being shipped into India at cheaper rates than those offered by domestic steelmakers," he said.

In a statement on Monday, domestic steelmaker JSW Steel said that the economic crisis in the international markets has slowed the demand for steel products.

"This has triggered dumping of products into India as import duties on steel were made 'nil' when international prices were high," the company said. JSW Steel added that there is an urgent need for measures such as import duty and a floor price for imports to prevent cheap steel products flowing into India and to safeguard the interest of the domestic industry.

Vikram Amin, the executive director (sales and marketing) at Indian steelmaker Essar Steel, said, "The US has an anti-dumping law, Europe has put in place a quota system to check the quantity of steel entering its territories. India too had a 5% import duty on steel in place till June but that was withdrawn as steel demand in the country is growing at 13% and the supply by only 6%."

Even when global prices were soaring, local steelmakers were not allowed to hike prices. However, now that international prices have dipped to below domestic prices, they have had to effect downward corrections. JSW Steel cut its prices by Rs 5,500 per tonne and now retails at Rs 32,000 a tonne.

The company said the revised prices have squeezed margins as contracts for key steel-making raw material coal were finalised at higher prices for the entire year.

State-owned Steel Authority of India Ltd (SAIL), India's largest steel producer, too has slashed prices and now retails at the same rate as JSW. These rates match those of imported steel for now. But imported steel prices will fall to $520 in the coming days, said an analyst with a leading brokerage. "This will squeeze the margins of Indian producers much more," he said, adding that currently, local steelmakers are earning a margin of Rs 7,000 per tonne. "This is expected to shrink to Rs 5,500 per tonne as imported steel gets cheaper."

Domestic players have been demanding an import duty of 15% to curb dumping. Amin said that Indian firms are ending up with huge inventories as they are unable to compete with international rivals. "The absence of import duty is impacting all primary steel producers," he said.

Union steel minister Ram Vilas Paswan had earlier said that the industry had helped the government when inflation was at its peak by not raising prices and so, the government recognises its contribution. "We will take care of them," he had said. The steel minister said the government has taken the industry's suggestions and is looking into it. "We don't have to go to the Cabinet to impose 10% import duty, but anything beyond that has to be approved by the Cabinet," he said.

The steel ministry's monitoring committee, which looks into the profitability of producers of the metal, will decide on the matter and make recommendations to the Cabinet accordingly.

An Ispat official told DNA Money that international steel producers have been dumping products into India at $600 per tonne, a rate that domestic players just can't think of.

More India business stories

Indian companies such as Essar, JSW and SAIL are already mulling production cuts or have gone ahead with a marginal cut. If the government doesn't pay attention to the domestic industry's woes, the country's dream to 124 million tonne by 2012 may remain just that - a dream.