China factor: Centre hikes steel import duty
In an effort to protect the domestic steel industry from surging Chinese imports, the Finance Ministry has hiked the duty imposed on various categories of steel.
However, categories such as stainless steel (flat) and CRGO (cold rolled grain-oriented electrical) steel have been exempted.
A senior Finance Ministry official said that barring exempted categories, steel products with 5 per cent duty will attract 7.5 per cent duty from Wednesday, a 2.5 percentage point increase. Products (barring a few) having 7.5 per cent duty will now have 10 per cent duty, again a 2.5 percentage point increase.
The official said the duty on ingots & billets, alloy steel (flat & long), stainless steel (long) and non-alloy long products will now be 7.5 per cent. At the same time, non-alloy flat products and other alloy flat products will attract a duty of 10 per cent.
However, CRGO (which is used mainly in transformers) will continue to attract 5 per cent duty, while stainless steel (flat) will invite 7.5 per cent duty.
Following the hike, shares of listed steel companies made smart gains on the bourses.
Though the industry feels that the hike should have been higher, Ministry officials said considering the current market situation, it is sufficient and will certainly curb dumping. Steel imports rose 69 per cent in the April-January 2014-15 period and reached 8.12 million tonnes. Out of this, China’s share was 2.9 mt, a whopping 205 per cent rise from 953,350 tonnes in the same period a year ago.
It is this that prompted both the steel companies and the Ministry to push for a duty hike.
Following the Finance Ministry’s decision, Steel Minister Narendra Singh Tomar said after anti-dumping duty, this is another concrete step toward ‘Make in India.’
FY16 will be tough year for north Indian cement market: Study
With both and retail institutional demand struggling to grow, the fiscal is likely to be a “tough year” for the north Indian cement market, which accounted for 31 per cent of the country’s consumption in 2014-15, a report said.
“FY 2015-16 will be a tough year for north India, with both retail and institutional demand struggling to grow,” Ambit Capital said in its report.
In 2014-15, north India accounted for 79 million tonnes or 31 per cent of the country’s cement consumption, it added.
“Our discussion with industry participants suggests that the seasonally strong April-June quarter has been poor and given the lack of government tenders, scope of a meaningful improvement in the remaining part of the year is limited.
“Hence, we do not envisage a volume growth in excess of 3-4 per cent, which itself is dependent on higher execution of infrastructure projects,” Ambit Capital said.
The year 2015-16 was expected as a recovery year, but demand has worsened as rural sales have declined sharply and real estate inventory has hit an all-time high. Infrastructure recovery remains elusive with weak government tendering.
North India accounts for one-fourth of cement produced in India (87 million tonnes installed capacity as on end 2014-15) with Rajasthan accounting for 54 per cent (and almost entire clinker capacity) and UP for 14 per cent of total capacity.
Shree Cement is the market leader, followed by UltraTech, Jaypee and Ambuja. Other relatively large producers are Binani Cement, JK Cement and JK Lakshmi, the report said.
The increasing prominence of regional manufacturers (51 per cent capacity share in 2014-15 as against 45 per cent in 2006-07) in a market with limited logistic challenges (largely roads) has led to price wars. Now prices in north India are at a 35 per cent discount in comparison to south India, it added.
North India is facing growth challenges, on account of infrastructure recovery remaining elusive and rural demand deteriorating significantly in the last one year due to poor rainfall, low subsidies, wage growth and paltry MSP hikes.
Besides, the real estate business is facing liquidity constraints due to the government’s clamp-down on black money, Ambit Capital said.
Regional manufacturers with scale and cost efficiencies will benefit the most in an infra-led cement demand recovery, it added.
Pan-India players trade at rich valuations, run earnings downgrade risks and do not have the best cost/capital efficiency to meaningfully improve return on capital expenditures, as volumes might grow but chances of a sharp pricing recovery are scanty, the report said.
“With retail demand languishing, price increases will be difficult to pass through, as the regional manufacturers compete on prices to garner the maximum volumes from the institutional clients,” Ambit Capital said.
Government mulls common coal trading platform for Coal India and private companies
The government is working on a common coal trading platform for Coal India and private companies which are likely to be offered lucrative blocks with prior clearances for commercial mining.
The electronic platform is likely to be an extension of the spot sale practice of Coal India called ‘e-auction’ where all the coal mined in the country, excluding from captive blocks, will be traded, a senior government official told ET. “It is too early to talk how the (coal trading) platform would be used but ultimately all coal in the country would hopefully be traded through this platform,” the official said.
State-run Coal India sold around 11% of its output through e-auction at a market-driven price in January-March. The government has decided to auction the company’s future coal supply to unregulated sectors such as steel, cement and captive power plants.
The proposed platform could trade Coal India’s auctioned supplies, the PSU’s uncontracted output, imported coal and the output of private companies from coal mines that will be auctioned for commercial use.
“A common electronic platform will ensure transparent trading, while letting the government record and monitor every single transaction,” another coal ministry official said.
The NDA government is working towards auctioning coal blocks for commercial use after enactment of Coal Mines Special Provisions Act that provides for opening the sector to Indian and foreign private firms, ending Coal India’s monopoly. Prior to this, Indian companies with end-use plants were permitted to mine coal for captive purposes.
The official said the government is exploring the option to auction coal blocks with upfront regulatory clearances. However, he said some approvals such as forest clearance require the final user to make certain commitments.
This post was written by Atlantic Admin