Steel prices shoot up day after FM Nirmala Sitharaman announces cut in customs duty

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Kolkata: Steel prices have shot up by Rs 1,500 per tonne on February 2, just the day after Union finance minister Nirmala Sitharaman announced a cut in the customs duty to bring down the prices of steel, said Sanjay Budhia, chairman of CII national committee of export-import and Managing Director of Patton International Ltd.

“It is quite shocking, totally unexpected! Steel prices have shot up by 1,500 per tonne effective from today. There was a general expectation that with reduction of custom’s duty in the Budget yesterday, steel prices should come down considerably, but totally it is the reverse,” said Budhia in a written statement.

Budhia pointed out that that while the price of a tonne of cold rolled steel was Rs 45,100 in July, it kept rising every month to reach Rs 65,700 in January 2021. “On February 2, the prices stood at Rs 67,200,” he said.

The CII official said steel mills announced price increase effective from February 2 and described it as the “final death nail to the engineering sector,” adding that the price rise is akin to shifting the patient from ICU to CCU.

“MSMEs and other user industries have been severely hit by a recent sharp rise in iron and steel prices. Therefore, we are reducing Customs duty uniformly to 7.5% on semis, flat, and long products of non-alloy, alloy, and stainless steels,” the finance minister had said in her budget speech on February 1.

“To provide relief to metal re-cyclers, mostly MSMEs, I am exempting duty on steel scrap for a period up to 31st March, 2022. Further, I am also revoking ADD and CVD on certain steel products. Also, to provide relief to copper recyclers, I am reducing duty on copper scrap from 5% to 2.5%,” she said.

Budhia said engineering exports constitute 25% of India’s merchandise exports.

“Exporters cannot bear this brunt,” said Budhia.

Incidentally, in the second week of January this year, engineering exporters body EEPC urged the government to intervene to check the runaway steel prices.

The body told the government that the price of hot rolled coil went up to Rs 58,000 a tonne that worked out to a 55% rise between January 2020 and January 2021, severely hurting the competitiveness of the exporters.

The price went up apparently due to strong demand from China in a year when production capacities were idle in many countries due to the pandemic-triggered lockdown.

Those connected with engineering exports say that the sector is one of the biggest generators of employment in India.

The engineering exporters usually compete with countries such as China, Vietnam, Taiwan, Malaysia that boast of developed infrastructure, cost-efficient ports, fast and cheap inland transportation and cash subsidies from their government.