The ICRA rating agency said that the Indian government’s proposal to reduce import duties on steel products into the country in the latest budget could increase competition in the local market. Domestic steel producers in the country are likely to come under price pressure in the short term, with domestic prices expected to decline by at least 10%.
In its budget for 2020-2021, the government has reduced customs duties on flat products from 12.5% to 7.5% and on long products from 10% to 7.5%.
Meanwhile, ICRA noted that domestic steel demand in the country is likely to remain strong in the coming months, especially due to recently announced infrastructure development and other positive announcements. This, in turn, will support domestic steel prices if world prices do not undergo a significant correction compared to current levels, added to the ICRA.
The duty cut is unlikely to affect imports from countries such as South Korea and Japan, with which the country has signed a Free Trade Agreement (FTA), according to the ratings agency. On the contrary, imports from other countries, including China, will be more competitive. For example, weak domestic demand led to a 10 percent drop in Chinese export prices for HRC in January this year.