The steel industry in India is at a disadvantage, especially while dealing with China, because the country has mastered the art of mixing low-grade iron ore with high-grade ore to make acceptable quality of steel
In recent months, due to the slowdown in the economy, China, it appears, has embarked on an aggressive export campaign to sell various products, particularly from the steel industry, where it has mastered the art of importing low grade iron ore and mixing it with the high grades from Brazil and Australia to produce internationally acceptable quality of steel. India is yet to learn this technique!
It may be remembered that, until a couple of years ago, China used to be biggest importer of low grade iron ore fines from Goa, almost reaching a 120 million tonnes in 2009-10, and using this with high grade ores. However, once the export of Goa ores got stopped due to the illegal mining activities, China continued its production, and is one of the few countries in the world that has surplus steel capacity.
In the past, primary steel exports have come traditionally from both Japan and South Korea, though others like Russia, Ukraine and others have supplied to the world markets, particularly to the Middle East, where the demand has been high.
Having thus created a huge surplus steel production capacity, reported to be around 200 million tonnes, China has begun to offer export incentives to its steel exporters, ranging from 13 to 28% of the export value. Indian imports from China, has gone up and the bilateral trade is in favour of China. Even today, 36% of Indian imports come from China, from toys to steel, as importers have obtained various steel products, reaching 2.8 million tonnes in 2014.
While imports of special steel products that are not manufactured or available in adequate quantities is understandable, from indigenous sources, reckless imports of even basic steel products, some of which are reported to be of poor quality, has begun to affect the indigenous industry. Indigenous steel producers are up in arms against this, and have been demanding the government either to ban such imports or increase the import duty substantially to make imports unviable.
As it is, the Indian steel industry is at a disadvantage in dealing with China, because the Chinese have mastered the art of using low grade iron ore with high grade ore to make acceptable quality of steel. To encourage the indigenous steel makers to buy domestic high grade ore, even NMDC recently reduced its prices, but cannot, unfortunately, increase its total overall production due to mining limitations, and press reports show that large quantity, estimated to be around 12 million tonnes of low grade ore are lying in ports for shipment, but this cannot be used by mills in the country. The steel industry, therefore, needs to import the technical know-how to use our own low grade ores.
In these difficult circumstances, one major move that can be done, by Prime Minister Narendra Modi when he visits China, is to invite them to set up steel mills in Goa so that the low grade ores mined there could be readily consumed, as the first step. And the second step is to offer a buy-back of the finished steel from Goa from Indo-Chinese mills that would come up, as a sequel to this proposal!
Until such a major development takes place, it is imperative that the government either bans the import of steel or increase the import duty to make it unviable for importers to bring in such large quantities.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.