Export duties on steel likely to cut; Tax on iron ore may be increased

The central government is likely to cut or abolish the recently-imposed export taxes on key steel products soon, while also raising the impost on iron ore dispatches. The move comes amid concerns expressed by steel makers that while domestic demand has remained dulled in recent months, companies are losing out to overseas customers due to the export taxes.

Moving in to controlled in input prices and control runaway inflation, the government on May 22 imposed an export duty of 15% on select pig iron, flat-rolled products of iron or non-alloyed steel, bars, and rods and various flat-rolled products of stainless steel, and another 45% on iron ore pellet. Similarly, the export duty on iron ores and concentrates was raised to 50% from 30%.

Responding to the move, the average monthly price of hot-rolled coil (HRC) a benchmark for flat steel soften in May to Rs 69,800 per tonne from Rs 76,000 in April. The average price decreased further in June (when the first full-month impact of the export curb was felt) to Rs 62,000 and to Rs 59,800 until July 6.

Steel exports, meanwhile, crashed to just 0.68 million tonnes in June from 1.38 million tonnes in May and 1.47 million tonnes in April. Iron ore exports, too, have collapsed. Ore exports plunged 66% on year in May to just $195 million amid fears that the shipment might have faltered at a more dramatic pace in June.

As for steel, domestic demand has started moving up in the past one week or so, that, too, at a slow pace. With export curbs in place, it would be difficult for companies to cut their inventory while maintaining the pace of production.

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