The Steel Dumpers – India facing onslaught

HOLDING the world’s fourth-largest reserves of iron ore, India wants to develop its domestic steel industry. But its continuing economic growth has made it a target for steelmakers wanting to dump surplus production as China’s expansion slows. Narenda Singh Tomar, India’s Minister for Steel and Mines, explains . . .

WITH A PROJECTED growth rate of 7,5 per cent this year, India has become focal market for exporters, especially from China, Russia and other countries wrestling with reduced demand and excess capacity.
One sector that has been the target is steel.
“These countries are trying to export their surplus steel to India because we are seen as a huge market. India is one of the rare countries in the world where consumption of steel is
increasing,” says Narendra Singh Tomar, India’s Minister for Steel and Mines. “At the same time, worldwide consumption is falling.”
Tomar told ATI during a visit to Sydney that per capita consumption of steel in India is just 60 kg against the global average of 225 kg.
He said imports of steel rose by 75 per cent last year, and in the three months from April to July, imports were up 60 per cent compared with the corresponding period of 2014. He
expects this trend to continue.
Through an interpreter, the Minister said both the Chinese yuan and Russian ruble have devalued, making their exports more competitive in the international market.
India is not alone in having to grapple with a flood of cheap steel into the country. Reuters reports that China’s steel exports rose 28 per cent to 43.5 million tonnes from January-May, even as domestic crude steel output fell nearly two per cent. In 2014, exports jumped 51 per cent to a record 93.78 million tonnes.
Eight steel associations from Asia, the Americas and Europe said in a recent joint statement that all regions were “suffering from a dramatic increase in unfair steel imports that is fuelled by massive global over-capacity”.
“Looming over it all is China, whose massive and increasing overcapacity in an era of slowing growth has already destabilised the global steel market and trade flows,” the statement said. The European Commission launched an anti-dumping probe against Russia and China in May. But Tomar told ATI his Government has not made any decision on whether to challenge China’s exports on the grounds of dumping.  
“We are watching the situation closely and we will not jump to conclusions.  We will see if other countries are deliberately subsidising or reducing the price of steel to wipe out our
domestic industry.”
Tomar says the Indian Ministry of Commerce looks after safeguard measures to protect
domestic industry. It, too, is examining whether it should introduce safeguards or take other
appropriate action. Indian producers are
demanding that duties be raised to protect them from the global reduction of commodity prices as they fight for their survival.
In June, New Delhi raised customs duty on base metals such as iron, steel, copper, nickel and aluminum by 2.5 per cent. Depending on the aluminum product, the duty rises in a range from 2.5 per cent for rods and sheets to 10 per cent for finished products.
While the Indian mining sector is not yet losing money, the Minister says its profit margins are being eroded because of the global situation. The sharp increase in imports is placing India’s steel sector, which is now fully deregulated, under serious stress, he says. There is also huge potential for the Indian steel sector, he adds. Based on India’s growth trajectory and the size of its population, steel consumption will increase.
Total production capacity in India is about 110 million tonnes today, and the intention is to lift capacity to 300 million tonnes by  2025.  
India, the world’s third-largest steel producer by volume, has been struggling to add new production capacity in recent years, mainly
because of delays in securing environmental clearances for projects.
Tomar has previously said that the Government will change the law to expedite land
acquisitions for farmers who are opposed to selling their land. And he wants to attract global investors. Indian companies are reportedly planning to invest around 2.94 trillion rupees (US$46.13 billion) over the next decade to
increase steel production capacity.
After assuming power last May, Prime Minister Narendra Modi has moved to attract long-term capital investment by overhauling some key policies. The Modi Government is championing Indian manufacturing to boost overall capacity in the country. Tomar points to the“Make in India” campaign as part of its strategy to
increase demand for raw materials produced in India.
“India has the fourth-largest iron ore reserves in the world. And what is critical is that the quality of the iron ore is also very good.” India’s terrain is similar to that of Australia or Brazil, where the mining sector is well developed.
Mining is under-developed in India for a variety of reasons, not least because of cumbersome regulations and lack of transparency.
The Government has introduced major
reforms to improve business confidence by making it easier for business to invest and to enhance transparency. It has also amended the country’s decades-old mining law.
Since January this year, to encourage exploration, all mining concessions in India will be allocated only through the process of auction.
Tomar says all mineral concessions, and
licences for exploration and mining leases will also be allotted through auction from the end of this year. “And if you get an exploration licence through auction, once you complete the exploration you will have the right to a mining lease.”
India’s royalty payment regime has also been streamlined, again to enhance transparency. Basically, royalty is paid on the value of minerals produced, and there will be no pre-payment.
In the past, he says, licences to explore virgin areas were handed out on a first-come-first-served basis. Although mining companies were chosen based on technical and financial competence, it was never clear how the concessions were awarded.
The system was described as the “beauty
parade process” – with a panel of officials given authority to pick winning tenderers.
Tomar says that under the new legislation all mining concessions will have a life of 50 years – compared with 30 years in the past — with options for extension.
The Indian Government has established the National Mineral Exploration Fund with contributions from royalties. The fund has a start-up capital of 500 million rupees and is expected to grow as mining activities increase.
Tomar says: “With these reforms, it is hoped to double mining output in India. Today, minerals contribute 2-2.5 per cent of GDP, but we want that to rise to 4-5 per cent of GDP by 2025. We want to double it in the next 10 years.”