Indian Steelmakers Demand Protection from Rising Chinese Imports
- September 25, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
Indian Steelmakers Demand Protection from Rising Chinese Imports
Sub: Eco
Sec: External sector
- Appeal for Safeguards:
- Indian steelmakers have urged Finance Minister to implement safeguard measures to protect domestic investments and industries from predatory-priced imports of steel from China.
- Steelmakers, through the India Steel Association (ISA), are requesting the imposition of anti-dumping duties, import tariff increases, and other trade actions, similar to measures adopted by the U.S., Canada, Europe, and Latin American nations.
- Global Examples of Protection:
- The U.S. has imposed a 25% duty on all steel products from China, with duties as high as 100% on certain steel categories.
- Europe has implemented a 25% safeguard duty on Chinese steel, and Canada is expected to impose similar duties starting in October 2024. Turkey has also levied anti-dumping tariffs ranging from 20.5% to 57.5%.
- Other Asian nations such as Japan, Vietnam, and Malaysia have initiated anti-dumping probes to curb Chinese steel imports.
- Rising Chinese Imports:
- Chinese steel imports to India increased by 93% year-on-year in FY24, turning India into a net importer of steel.
- From April to August 2024, India continued to be a net importer, with the trade deficit in steel surpassing FY24 levels.
- Proposals by Indian Steelmakers:
- Doubling the import duty on steel from 7.5% to 15%.
- Imposing safeguard duties of up to 25%.
- Implementing an export duty on low-grade iron ore (below 58% iron content).
- Removing the lesser-duty rule, which allows lower tariffs on certain imports.
- They also suggest adding $80-100 per tonne to the landed cost of imported steel to ensure a level playing field for domestic producers.
- Challenges in Export Markets:
- Indian steel exporters are facing a 40% decline in outbound shipments due to global trade barriers and increased competition from cheaper Chinese steel sold at predatory prices.
- Impact of China’s Housing Slowdown:
- A prolonged slowdown in housing demand in China has led to a surplus of steel, causing price distortions in the global market, particularly affecting India’s domestic steel industry.
The steelmakers are seeking these protections to safeguard ₹70,000-₹75,000 crore in annual investments and to ensure fair competition in both domestic and export markets.
Safeguard Measures under WTO:
- Anti-Dumping Duty: Imposed when a foreign company exports a product at a price lower than its home market value, to protect local industries from unfair competition.
- Countervailing Duty: Imposed to counteract subsidies given by foreign governments to their exporters, which distort trade.
- Quotas: Limits the quantity of a particular product that can be imported during a set period.
- Tariffs: Taxes on imported goods to protect domestic industries or raise revenue.
Predatory pricing
Predatory pricing refers to the practice of a company setting very low prices, often below cost, to drive competitors out of the market. Once the competition is eliminated, the company may raise prices to recoup losses and dominate the market. This strategy harms competition and can result in a monopoly or reduced choices for consumers.
It is considered an anti-competitive practice and is illegal in many countries under competition law or antitrust regulations. However, proving predatory pricing in court can be challenging.
Example: A large retailer drastically reducing prices to outlast smaller competitors.