The Hindu Business Line : `US plan to cut tariff may push steel prices up'

PRIMARY steel producers are not expecting a windfall following the US Government's decision to reduce tariffs on its steel imports but are hopeful that it may lead to an increase in global steel prices.

Sources in the major steel companies said that the current market scenario in the US is not yet ripe for the Indian steel producers to make a beeline but the recent development is certainly a positive one.

According to them, the decision of the Bush administration is likely to help the members nations of the European Union most but will certainly create a conducive atmosphere for the Indian players in an indirect manner.

"In all probability the steel producers of the European nations and Japan will start vying for the American steel market as they are most favourably placed. We, the Indian producers, will be unable to make much of a headway in the American market", sources.

The reason is simple. Though the US Government has removed some of the controversial import duties last week, still the anti-dumping duty and the counter-veiling imposed on the Indian producers remain.

Indian steel companies were subjected to different rates of duties depending on the product and the tonnage. These duties were ratified by the Bush administration in November 2001.

If the European and the Japanese steel producers run for the American market, then they will either have to increase their production to meet the incremental demand or they will create a vacuum in the global market.

At present, the European players are catering mostly to the demand of their own continent and Japanese players are focused on the South East Asian markets including China and Korea.

The freight cost is another important factor. With the increasing transportation cost, it will be interesting to see whether the Japanese or European players run for this market.

Another section of the industry is quite skeptical. They feel that these arguments are too theoretical. Instead they are adopting the `wait-and-watch' policy.

It may be noted that the US is one the three big global consumers of steel. Its total consumption (along with its two NAFTA partners) is around 105 million tonnes in 2003. The industry is expecting that it is likely to increase the same to 180 m.t. in 2004. On an average 15 per cent of annual American steel consumption is met by imports.

However, every steel company is expecting a rise in the prices of steel products in the global market due to the American decision, as a demand of around 27 m.t. (15 per cent of the American consumption) is created overnight.

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