Abhishek Law | New Delhi, June 09 |
Nearly 95 per cent of the offerings by steel majors have reportedly come under the export tax ambit
Hit by steep export duty, Indian steel mills are re-working their product offerings to cater to overseas buyers and protect their topline and bottomline. A supply glut, due to absence of major export orders for nearly two weeks, and poor domestic demand, have led to mills being stuck with just one month of stock.
Steel companies are exploring offers from Vietnam and the Middle East for alloyed hot rolled coils (HRC) which are not under the duty ambit, trade sources told BusinessLine.
India’s monthly crude steel production is around 10 million tonne (mt), spread across private and PSU players. The country exported 13.5 mt of finished steel in FY22 posting a 25 per cent y-o-y rise. Mills, including PSU-major SAIL, are looking at exporting semi-finished products — where no taxes have been levied. Others are looking at speciality offerings like rail plates or rail-infra that have also escaped the export tax net.
Nearly 95 per cent of the offerings by steel majors have reportedly come under the export tax ambit.
Anil Kumar Tulsiani, Executve Director — Finance, SAIL, while speaking at a post results earnings call, said: “We have certain orders (exports) and are evaluating what is to be done. SAIL does not export much and it has got one advantage, that it is exporting semis (which do not attract export tax).”
Industry estimates that over 1.4 mt of export contracts hang in balance as these are not backed by letters of credit. Steel Ministry officials said these are orders where mills have either entered into contracts or have received advance payment against future delivery dates. There are no letters of credit against these orders.
Mills have the option of either exporting them at a loss (by paying the duty) or get involved in a long litigious process because of forced cancellation.
Jayant Acharya, Deputy MD, JSW Steel, while speaking at a post results analysts call, said the steel-maker will pay the export duty for vessels under shipment. For whatever was at the port, which was custom cleared, would not need any export duty payment.
“Whatever we have to clear with the export duty payment, we will be doing under protest. Past precedent is that (wherever) the letters of credit had been issued and contracts are valid, those will be exempted. So that is the assumption based on which we would be paying under protest,” he said.
HRC exports hit
Meanwhile, HRC prices continue to be under pressure. Buyers are waiting to see if or not the prices have bottomed out before they opt for deliveries. SteelMint’s India HRC export index was recorded at $730/t FOB east coast on June 9; contrasted against $821/t FOB level on May 17. Exports realisations are lower than domestic with overseas sales continue to be slow.