Steel output may not rise in FY17: Ind-Ra

Steel output may not rise in FY17: Ind-Ra

Steel output may not rise  in FY17: Ind-Ra

Pick-up in Indian steel production is supported by the minimum import price (MIP) policy, and is unlikely to continue beyond August 2016, after the expiry of MIP, according to India Rating & Research (Ind-Ra).

During the first quarter of the current fiscal (Q1FY17), total domestic steel production growth was healthy at 3.8% (YoY), while the overall steel consumption grew by only 0.3%. Additionally, in Q1FY17, imports fell by 30.7% (YoY).

Ind-Ra believes that the continuation of protection measures beyond August 2016, will be required to safeguard the interests of the domestic steel industry, which has shown signs of a recovery.

The rating agency also states that the replacement of MIP with anti-dumping duties may not have the desired impact, since anti-dumping may not be as widely encompassing as the MIP.

While the steel industry is arguing for an extension of MIP, the rollover would remain a formidable decision for the government, since the economy has not moved to the pareto-optimal equilibrium when MIP was imposed, Ind-Ra states. Post the introduction of MIP, there was minimal growth in domestic steel production during February and March 2016, with total steel production growing by a meagre 0.3% (YoY).

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