As the government relents, steel players must get their house in order
However, in the last quarter, steel prices again fell by almost 20%, as the Government imposed a 5% import duty on steel products. According to Pawan Burde, steel analyst, Angel Broking, “Government is trying to control the falling steel prices by giving various sops to the steel sector.” The Government of India has now allowed all the withdrawn benefits and announced a 4% cut in central excise duty on steel production. Also, exporters will again be entitled to enjoy the tax benefits under the DEPB scheme. Also, the steel industry took certain measures on its own to maintain balance in the inventory. Says an analyst, “Various steel companies reduced their production by 15-20% in the last quarter. This helped in reducing production costs and prevented inventory imbalances.” Reduction in production has helped bridge the demand-supply gap. Where on one hand, the domestic steel market has stabilised; exports have also picked up in the last quarter. Iron ore exports reached 13.5 million tonnes in December 2008 as opposed to 9.8 million tonnes exported last year (an increase of 37.75%).
As the tables have turned in the favour of steel players, the Indian steel sector, in order to further augment their growth, has taken certain measures. For starters, the Indian steel players have announced that they will refrain from further price-cuts as demand in the domestic market has marginally revived. Furthermore, steel companies have also demanded that more liquidity should be injected in the system to enhance demand from key sectors such as automotive and construction. Adds Burde, “Steel players have also demanded that import duty may be increased from current 5% to 15%.”
From Rs.50,000 per tonne in March 2008, steel prices have fallen to Rs.30,000 per tonne at the start of this year. But as things start taking a favourable shape, it is expected that 2009 will bring some respite. While the Government should make sure that the economic slowdown in the country should not impact the automotive and construction sector; steel players on the other hand should balance their inventories, refrain from further price cuts and seek to augment their exports.
However, in the last quarter, steel prices again fell by almost 20%, as the Government imposed a 5% import duty on steel products. According to Pawan Burde, steel analyst, Angel Broking, “Government is trying to control the falling steel prices by giving various sops to the steel sector.” The Government of India has now allowed all the withdrawn benefits and announced a 4% cut in central excise duty on steel production. Also, exporters will again be entitled to enjoy the tax benefits under the DEPB scheme. Also, the steel industry took certain measures on its own to maintain balance in the inventory. Says an analyst, “Various steel companies reduced their production by 15-20% in the last quarter. This helped in reducing production costs and prevented inventory imbalances.” Reduction in production has helped bridge the demand-supply gap. Where on one hand, the domestic steel market has stabilised; exports have also picked up in the last quarter. Iron ore exports reached 13.5 million tonnes in December 2008 as opposed to 9.8 million tonnes exported last year (an increase of 37.75%).
As the tables have turned in the favour of steel players, the Indian steel sector, in order to further augment their growth, has taken certain measures. For starters, the Indian steel players have announced that they will refrain from further price-cuts as demand in the domestic market has marginally revived. Furthermore, steel companies have also demanded that more liquidity should be injected in the system to enhance demand from key sectors such as automotive and construction. Adds Burde, “Steel players have also demanded that import duty may be increased from current 5% to 15%.”
From Rs.50,000 per tonne in March 2008, steel prices have fallen to Rs.30,000 per tonne at the start of this year. But as things start taking a favourable shape, it is expected that 2009 will bring some respite. While the Government should make sure that the economic slowdown in the country should not impact the automotive and construction sector; steel players on the other hand should balance their inventories, refrain from further price cuts and seek to augment their exports.
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