A flood of cheap Chinese steel has prompted smaller Indian mills to consider scaling back of operation and job cuts, Reuters reported on Wednesday.
India, the world’s second largest steel maker, turned into a net importer last year as the government contemplates curbing imports.
Capacity utilisation has dropped by nearly a third over the last six months in India’s small and medium-sized mills, executives from a dozen such producers told Reuters.
The small and medium-sized mills account for 41% of India’s steel output and employ about 1.5 million people, according to the Reuters report.
The report claimed that in Mandi Gobindgarh, which is considered Punjab’s “steel city”, mills have been struggling to compete with cheap Chinese imports.
Domestic steel makers struggles to compete with cheap Chinese imports
The Chinese steel is often sold at a discount of 10% compared with the Indian offerings.
“If we are not able to compete in the market, our plant won’t run at full capacity,” Adarsh Garg, chairman and managing director at Jogindra Group told Reuters.
Garg said:
We will be forced to lay off 10% to 15% of our employees here if this continues.
Garg said despite offering discounts, the company’s sales have dropped 30-35% in the past six months, which prompted the company to cut output by nearly a third.
Raju John, director general of the Builders Association of India, told Reuters that Chinese steel imports are sold for $25 to $50 a ton cheaper, and sometimes as much as $70 per ton.
He said that Indian engineering firms and developers have been lured by discounts on Chinese imports.
Finished steel imports from China reached an all-time high this year, up more than 30%, and included both hot-rolled steel used in construction and galvanised steel for the automobile industry, according to Reuters.
Impact on industry
China is the largest steel maker in the world, and produces more than the rest of the world combined.
The country’s cheap steel has invited widespread trade complaints across the globe.
Rising output and export volumes in China have affected demand from the domestic construction industry amid an ongoing property crisis.
This has also affected the steel market overseas as export volumes grew from China.
Indian Steel Association said in a presentation to the government that companies are struggling to initiate expansion plans after their profit margins dropped by 68% to 91% so far this fiscal year, according to Reuters.
Even big steel makers in India such as JSW Steel (NS:JSTL) and Tata Steel (NS:TISC) have supported the Indian Steel Association’s efforts to push for curbs on Chinese imports.
Source: Reuters
India’s exports suffer
Indian steel mills told Reuters that export orders they were expecting during July-September did not come through as the companies lost business to China.
In Pune, Neo Mega Steel has lost orders from the automobile industry to Chinese rivals, Managing Director Vedant Goel told Reuters.
And in western Maharashtra state, Bhagyalaxmi Rolling Mill has been hit by a sharp drop in exports, according to the report.
Many mills expect production cuts if the current situation continues.