30 May 2022
Steel export duty dilemma: Sell at a loss or lose customers, says JSW Steel's Seshagiri Rao
The Indian government levied a 15% export duty on steel 21 May in a bid to increase supply for domestic consumer industries and tame inflation. A steep export duty was also levied on iron ore while import duties were cut on inputs like coal to reduce the cost of production for steelmakers
"The Indian government levied a 15% export duty on steel 21 May in a bid to increase supply for domestic consumer industries and tame inflation. A steep export duty was also levied on iron ore while import duties were cut on inputs like coal to reduce the cost of production for steelmakers.
The new export duty levied on steel by the Centre has put steelmakers in a dilemma of choosing between margins and relationship with customers as they ponder whether to continue exports even at a loss, said Seshagiri Rao , the joint managing director of NSE 1.66 %.
""Exporting after paying 15% duty is definitely a loss-making proposition. But we have to look at the long term," said Rao. "If we don't supply to our customers that we have developed over the last decade, we will lose them."
" "Rao believes the duties to be a temporary measure by the government to arrest
The Indian government levied a 15% export duty on steel 21 May in a bid to increase supply for domestic consumer industries and tame inflation. A steep export duty was also levied on iron ore while import duties were cut on inputs like coal to reduce the cost of production for steelmakers.
Rao drew parallels to a similar export duty levied in 2008 by New Delhi, which was revoked partially within a month and completely within five months. The government has not indicated any timeline for revoking the current export duty on steel.
Even within the domestic market, steel companies are laden with inventory that was manufactured at high input costs. But customers will expect to pay lower prices now following the changes in the duty structure. All this will put a pressure on margins, Rao said.
While JSW Steel will continue with its planned brownfield expansions, the company will review its investments in greenfield capacity expansion in light of the new export duty, he said.
“Capital expenditure that is already ongoing today, I don’t think there is any possibility of reviewing that. These are all at an advanced stage,” Rao told ET.
JSW Steel will be merging NSE 1.62 % (JISPL) Limited into itself to leverage synergies between the companies and achieve better efficiency, the company said Friday. Formerly Monnet Ispat NSE 1.62 % & Energy Limited, JISPL was acquired by JSW Steel and its promoters in 2018 through bankruptcy court.
The company will also be merging Asian Colour Coated Ispat and Vallabh NSE 1.45 % – acquisitions made in the recent past – into JSW Steel Coated Products to bring all its coated steel businesses under one umbrella. The company wants to establish JSW Steel Coated Products as a leading player in the branded products and retail sales category, Rao said.
Bhushan Power & Steel Limited (BSPL), another company that JSW Steel acquired from the bankruptcy court is also being considered for a merger. However, the merger will be effected only after an ongoing litigation in the Supreme Court involving the company concludes, Rao said.
Source: https://economictimes.indiatimes.com/industry/indl-goods/svs/steel/steel-export-duty-dilemma-sell-at-a-loss-or-lose-customers-says-jsw-steels-seshagiri-rao/articleshow/91880350.cms