For quite some time now, domestic steelmakers have been lobbying for an increase in import duty to 15% from 5% now, claiming that it would protect the Indian market from cheap imports from CIS countries, mainly China, Russia and Ukraine.

But analysts see any such hike in duty as an opportunity for domestic steelmakers to increase prices by at least 10%.

Requesting anonymity, an analyst with a domestic brokerage said that Indian companies have been selling steel in the local market at a premium. While steel costs about Rs 28,000 a tonne in the domestic market, imported steel is available for $500 per tonne (Rs 25,000), including 5% duty. "If the government imposes the duty (of 15%), which it has agreed to, Indian steelmakers will get some room to increase prices," the analyst said. This is because the increase in duty will narrow the price difference between imported and domestic steel.

As there is a cap on the quantity of steel that can be imported, customers will have to turn to domestic steelmakers for their requirements even if prices are increased. On the condition of anonymity, another analyst said, "Domestic players may increase prices by 10%, in line with the import duty."

Steel players, however, deny any such move. Seshagiri Rao, director (finance), JSW Steel, said, "We don't expect steel prices to go up because of this (import duty hike). The duty has to be increased to save domestic manufacturers from dumping (of cheap steel)."

Vinod Garg, executive director (commercial), Ispat Industries Ltd, echoed his sentiments. "Steel prices won't go up. This move is to curtail excessive imports as countries like China, whose cost of production is $550 per tonne, are exporting to India at a much lower price," he said.

However, not everyone ruled out a price increase. Ankit Miglani, director (commercial) at Uttam Galva Steels Ltd (UGSL), which produces cold-rolled and galvanised steel, said the company mainly imports its raw material - hot-rolled coils (HRC). "If the duty is increased then our finished product costs goes up," he said.

Requesting he not be named, an analyst said that domestic demand has been inching up in the last one month and is expected to increase further from here on. "This demand forecast might prompt steelmakers to push up prices a bit," he said.

Steelmakers, too, see better days ahead. B Muthuraman, managing director, Tata Steel, had said in Kolkata on February 13, that the company expects February sales to post month-on-month increase of 10-15%. 

Shubhashish/ DNA-Daily News & Analysis Source: 3D Syndication