Indian ferrous industry groups lobby for duty changes
Indian ferrous industry groups have urged the government to change the duty on raw materials ahead of the country's 2022-23 union budget.
Indian domestic steel prices hit record highs last year on the back of higher raw material costs, hurting domestic demand. Prices of domestic hot-rolled coil (HRC) prices hit 71,000 rupees/t ($951/t) ex-Mumbai, excluding goods and services tax, in November.
Industry bodies like the Indian steel association (ISA) and the Federation of Indian Mineral Industries (FIMI) have recommended the government to lower the basic customs duty on coking coal from the current 2.5pc (1pc basic custom duty + 1.5pc agriculture and infrastructure development cess) to zero.
The recommendation comes at a time when coking coal prices into India have hit a record peak. Tighter availability has pushed premium hard coking coal cfr India prices to $455/t as of 21 January. The high cost of the key raw material had led to record-high domestic steel prices in November last year, upending consumption.
FIMI also recommends a waiver on the metallurgical coke import duty from the current 5pc to zero, and the removal of the anti-dumping duty on met coke.
Both the groups, along with the Federation of Indian Chambers of Commerce and Industry (FICCI), have also sought a removal of coal cess from the current 400 rupees/t ($5.35/t) to zero. The current coal cess keeps power producing costs in steel companies' captive power plants elevated.
FIMI has further requested the government to withdraw an export duty of 30pc on 58pc Fe iron ore and above.
Iron ore exports have sharply declined from 117.37mn t in 2009-10 to 57.22mn t in 2020-21, FIMI said, adding that the domestic steel industry's iron ore requirements are of 62pc Fe. This means that the 121mn t of iron ore estimated to be lying at the mine-heads in Jharkhand, Odisha, which are mainly of 58pc Fe to 62pc Fe grade, could benefit from the export duty withdrawal.
ISA also recommends the government to include iron and steel under the Remission of Duties and Taxes on Export Products (RoDTEP) scheme as it will help boost the export competitiveness of downstream industries that use steel as a major input raw material. The government excluded the iron and steel sector while introducing the new export rebate policy in August last year.
India's finished steel exports stood at 10.78mn t in the 2020-21 financial year, while shipments had already reached 10.3mn t during April-December 2021.
The steel association has requested the government to restore the anti-dumping duties and countervailing duties that were suspended in last year's budget, while also asking them to renew the anti-dumping duties on hot-rolled and cold-rolled steel which was recently turned down by the government.
"Reduction and rationalisation of certain duties… will help create a level playing field in the global arena, especially in a context where two-thirds of imports from countries having free trade agreements (FTA) with India arrive at zero basic customs duty, [and] do not incur similar costs," the Indian Steel Association's secretary general Alok Sahay said. India has a free trade agreement with South Korea and Japan.
Meanwhile, the Material Recycling Association of India (MRAI) has requested the government to remove basic customs duty on all imported metal scrap to create a level playing field for Indian recycling firms and secondary producers. Last year, the government lowered the customs duty imposed on ferrous scrap and waste imports, listed under the HS code 7204, to 0pc until 31 March 2022.
"We urge the government to continue with their existing zero duty on ferrous scrap imports until we generate sufficient quantity and quality of ferrous scrap from the domestic market," MRAI president Sanjay Mehta told Argus.
Domestic steel demand contracted by 5.7pc on the year in October-November 2021, suggesting that demand from the infrastructure and construction sector has slowed down in recent months, ratings agency ICRA said, adding that "a higher budgetary allocation in the steel-intensive infrastructure and transportation projects could provide a fillip to domestic steelmakers."
India's finance minister Nirmala Sitharaman will present the union budget for the financial year 2022-23 on 1 February.
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We took some advice on that from the IEA…and when that question was posed (to IEA), the answer that was given was it would take about $1.5 trillion to build a pilot plant using hydrogen by 2035 and probably about another equal or greater sum to build a commercial facility by 2040. So, I don't lose a lot of sleep on the demand for coal for blast furnaces. What I do see shifting, however, is the US has held relatively steady at about 20mn short tons (18.1mn metric tonnes) of met coal demand over the last 10 to 15 years. The growth is clearly overseas, and the growth is clearly at the moment in Asia. When we started back in 2017, and 2018 was really our first year of production, we predominantly sold coal domestically; I think 80pc of our coal went to US steel mills. Now that is almost reversed. We're going to sell probably this year, 70pc overseas, and about a third or less domestically. With Europe moving towards electric arc furnace technology and significant new blast furnace capacity coming online in Asia, what kind of role will the US play as a coal supplier over the coming years? It is cheaper to use a blast furnace than electric arc. And the steel that they (Asian companies) mostly require is the heavier steel for cars and buildings and things of that nature. So, they have a bias towards blast furnace capacity. The US and Europe are very developed economies that are trying to go and wean away from coal, (while) the rest of the world is aggressively moving further into coal. People will shake their heads at the cost that European and American consumers will start to have to pay for that privilege. We see market growth is still there, but it's a different kind of growth. It will be more in the Asian markets, predominantly some in Europe, some in South America and Africa. The low vol coal demand in Asia is extremely strong because while they are able to buy high vol product from Australia very inexpensively, they do not have the low vol production. They need that to blend up to get the proper mix in their blast furnaces. There is a very good future for low vol, and that is the direction we are positioning ourselves. How confident is Ramaco about securing its investments in the longer run given the emphasis on ESG? What I see is sort of a dichotomy. In the thermal coal business, there's not a lot of investment in new mining there for the obvious reason that their customer base is declining. On the met side, it is a bit shortsighted from an investment standpoint because of the composition of the ownership of met coal companies. Virtually every major metallurgical coal producer except for us went through bankruptcy and post-bankruptcy proceedings. 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Now what we are doing is we are going through a process of further chemical analysis and testing to determine what is the best extraction and refinement technique. And the last point you raised was financing. We have a very nice growing mining metallurgical business, which can provide the funding to do whatever we want to do on rare earth. I am not too concerned about our financing capability. Any updates on your coal-to-carbon product projects ? We have looked at a number of different things with the national labs. We started looking at carbon fiber, which could be made from coal and we have got some patents around some very interesting processes. The areas that we are now focusing on...are using coal to make synthetic graphite. The other thing we are working on is using coal for direct air capture. We are considering going into a pilot phase sometime starting later this year with Oak Ridge National Laboratory on a synthetic graphite plant. 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