VITAL INDUSTRY UPDATES – 10/04/2015

April 10, 2015 11:53 am Published by

Odisha traders on strike, demand lifting of VAT on dal, wheat

Traders under the banner of Federation of All Odisha Traders’ Associations (FAOTA) today began an indefinite strike demanding exemption of value added tax (VAT) on pulses, wheat and wheat products in the state.

“We have stopped procuring pulses, wheat and wheat products from other states from today as the government have no sincerity to withdraw VAT on these food items,” said FAOTA secretary Sudhakar Panda. About 90 per cent of state’s dal and wheat requirement is imported from outside, he said.

While the state government wanted to continue VAT on the pulses and wheat products till introduction of the goods and service tax (GST), the traders’ body was in no mood to wait till the central taxation came into force.

The state government, however, appealed to the traders’ body to cooperate with the administration and wait till introduction of GST.

“We appeal to the traders to come for discussion and resolve the matter amicably. We want that the traders should also understand the revenue status of the state,” said state Food and Supplies Minister Sanjay Dasburma.

The minister said there was enough stock in the market.

Panda, however, said the stocks would meet requirement of the market for at best one week.

 

 

Steel imports up 71% in FY15

India has imported 9.32 million tonnes (mt) of steel items in 2014-15, up around 71 per cent year-on-year. According to steel sector analysts, this has been the highest import of steel items in the past five years.

According to the recently released provisional data by the Joint Plant Committee, export of steel items dropped 8.1 per cent to 5.5 mt.

The production of finished steel at 90.55 mt, was up 3.3 per cent, and consumption at 76.35 mt increased by 3.1 per cent.

The figures indicate reduction of insularity of the Indian steel market and increase in global competitive pressure.

Jayanta Roy, Senior Vice President and co-head of corporate sector rating of ICRA told Business Line that lower landed cost of imported steel items has been behind this surge in import. “The price differential was because of higher domestic cost of production. Internationally, reduction in iron ore prices has been much more prominent than that in the local market during the previous year. This was one of the factors contributing towards higher cost of production,” he explained.

Price of Chinese hot rolled coils (HRC) ruling at around $370 a tonne, at present. This translates into landed cost of imported steel (at port) cheaper by almost $89 a tonne than the prevailing domestic steel prices, after accounting for the current exchange rates, ocean freight and various duties, industry insiders said.

The benefit for Indian producers buying iron ore locally was, however, limited. International iron ore prices dropped by $65 a tonne (from around $115 a tonne in April 2014 to around $50 a tonne now) in the last one year, the domestic price reduction was just around $9 a tonne. “This imparted cost advantage to international players by almost $90 a tonne in steel making, since each MT of steel requires around 1.6 MT of iron ore”, Roy said.

According to a recent report of Ernst & Young, global steel demand forecasts were lowered in the second half of 2014 as the earlier positive momentum faltered. “We are witnessing role reversal as several rapid-growth markets have not performed up to expectations in creating demand. Steel margins are improving as iron ore prices reached new lows, while an increase in new seaborne supply met reduced growth in Chinese steel demand”, the report said. However, steel prices also have drifted, unable to retain the gains on input costs.​

According to a recent report of Ernst & Young, global steel demand forecasts were lowered in the second half of 2014 as the earlier positive momentum faltered. “We are witnessing role reversal as several rapid-growth markets have not performed up to expectations in creating demand. Steel margins are improving as iron ore prices reached new lows, while an increase in new seaborne supply met reduced growth in Chinese steel demand”, the report said. However, steel prices also have drifted, unable to retain the gains on input costs.​

Steel makers approach government to look into dumping by foreign players

ET Intelligence Group: The Indian association of steel manufacturers has approached the finance and steel ministries to look into the increasing dumping of steel by foreign players. Steel imports have doubled in the past six months, impacting domestic manufacturers and related businesses.

According to the data released by the commerce ministry, the monthly steel imports have been over 1 million tonnes for the last few months and are rising. “The rate at which the steel is being dumped in India, makes the Indian steel manufacturing unviable. Not only is the quantity of imports huge but also the price at which they are dumping is unviable. Their cost of sale is our cost of production,” said an official of Indian Steel association (ISA).

The Indian Steel Association comprises all the leading steel manufacturers including Tata Steel, SAIL, JSW Steel and Jindal Steel. Some of these manufacturers had seen a huge earnings growth from exports in the second half of FY14 and first half of FY15 after the rupee had fallen sharply against the dollar making Indian players more competitive. However, the relative strength of Russian, Chinese and Japanese currencies weakening against rupee over the past few months have given foreign player the cost advantage.

The stocks of the domestic steel manufacturers have fallen by 10-26% over the past six months. To keep the production high and recover the fixed costs, the domestic steel manufacturers have taken several rate cuts across products over the past year. The largest iron ore producer NMDC has taken three rate cuts within a year. “We have already made a presentation to the ministries. Now, it depends on the government to do what it feels is appropriate,” said a spokesperson of Tata Steel. The finance minister in the Budget mentioned that import duty of up to 15% can be levied; however, it has not been implemented yet.

 

 

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