Imposition of export duties: ICRA says steel deliveries will fall by a quarter in FY23

Finished steel exports from India are expected to fall by a quarter in the current fiscal year for the imposition of export duties on such products from May 22, the ICRA rating agency said Thursday, reviewing the outlook for the industry from previously “stable.” ‘ from ‘positive’.

“The government’s recent announcement of a 15% export tax on various finished steel products covers more than 95% of India’s finished steel exports and therefore makes exports a much less attractive proposition as factories evaluate the economy of a higher excise duty. As a result, finished steel exports from India are expected to decline by 25% year-on-year in FY23,” it said.

India exported 13.5 million tons of finished steel last fiscal year, which is likely to fall to 10 tons this fiscal year. The decline in exports is likely to be stronger in highly competitive markets such as Southeast Asia and the Middle East compared to Europe, where export offers tend to be higher.

However, the rating agency said that since semi-finished products have been kept out of excise zones, exports of plates and other products will increase significantly, by about 40%, in the current fiscal year. India’s semi-finished goods exports totaled 4.9 tons last fiscal year, down 26% from the previous fiscal year.

Steelmakers are also exploring the possibility of switching to exports of value-added/alloy steel categories that are also outside their remit, said Jayanta Roy, Senior VP and Group Head, Corporate Sector Ratings, ICRA.

“On the import front, as competition in the domestic market intensifies and domestic prices for hot rolled coils trade at a discount of about US$110-120/MT from the landed cost of Chinese export offerings, domestic mills would strive to partially imports of standardized steel grades, and this is expected to lead to a decline in total finished steel imports to India by about 10% year-on-year in FY23,” he said. India imported 4.7 Mt of finished steel last fiscal year.

Domestic steel consumption is likely to increase by 7-8% in the current fiscal year. “We are hopeful that all the budget allocations in the Union budget for various projects and coupled with the decline in steel prices, there could be some degree of demand revival.” Capacity utilization is likely to reach 82% in the current fiscal year, compared to 80% in the last fiscal year.

Roy said there could still be some price correction, but that wouldn’t have much of an impact on steel producers’ margins, as input costs are also falling.

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