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MarketScreener Homepage  >  Equities  >  NATIONAL STOCK EXCHANGE OF INDIA  >  JSW Steel    JSWSTEEL   INE019A01038

JSW STEEL

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Exclusive: India fears U.S.-China trade war will lead to dumping of Chinese steel - sources

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05/14/2019 | 07:33am EDT
FILE PHOTO: A worker rides his bicycle past steel rims in a dockyard at Mumbai Port Trust in Mumbai

NEW DELHI (Reuters) - India fears China could soon start flooding excess steel into its market after the United States raised tariffs on Chinese products due to the escalating trade war between the world's two largest economies, according to three government sources and four industry officials.

As a result, the Indian steel industry has asked the Indian government to put in so-called safeguard duties of as much as 25 percent to protect it from growing imports. These would be imposed on steel that the government determines has been dumped in India at prices below the cost of production.

Since last year, China and the United States have been locked in a trade conflict as Washington seeks to fix the trade balance, currently tilted in favour of Beijing. The two nations have raised or threatened to raise tariffs on each other's goods, moves that could re-draw trade flows and that have threatened to derail the global economy.

"China has excess (steel) capacity and there is a concern they could re-route it through other countries like Vietnam and Cambodia into India," an Indian government source with direct knowledge of the matter said.

"Steel sector is vulnerable," the source said, declining to be identified due to the sensitive nature of discussions.

India, the world's second-largest steel producer, turned net importer in the year ended March 31, 2019 after a gap of three years. That is because the country lacks the capability to produce high-quality steel and has lost some of its global clients to cheaper exports from China, Japan and South Korea.

"China, Japan, Korea which are major exporters to U.S., Europe and Canada, because of trade actions, they are also diverting steel into India," Seshagiri Rao, joint managing director at JSW Steel Ltd, told Reuters.

DEMANDED SAFEGUARD DUTIES

"It is very much essential for government of India to increase the safeguard duty to 25 percent as soon as possible," said Rao. Currently, there are a range of such duty levels.

Last month, steel companies JSW, Steel Authority of India, Tata Steel, Jindal Steel and Power - controlling over 45 percent of India's total steel production - met with government officials to ask for safeguards, according to a source who attended the meeting.

During the meeting, Steel Secretary Binoy Kumar, the top bureaucrat in the Ministry of Steel, also said that the steel industry was at risk from global excess capacity, the source said.

Kumar said India need to act soon to protect its fragile steel industry from predatory imports as it would be difficult to revive it if the situation was allowed to deteriorate for three-to-four years. However, he said a decision on safeguard duties has not yet been taken.

The steel ministry did not respond to Reuters' emails and phone calls seeking comments. Neither did SAIL, Tata and JSPL.

"What we are seeing is that part of displaced exports is already making inroads," said Arnab Kumar Hazra, assistant secretary general at the Indian Steel Association, which represents major steel producers. There was therefore every reason to argue for safeguard duties given the perceived threat, he said.

India had imposed a slew of safeguards in 2015-2017 on several steel products to curb cheaper imports and protect local industry, prompting Japan to refer India's behaviour to the World Trade Organization (WTO) dispute panel.

India's trade deficit with China jumped more than a nine fold over the past decade to $63.05 billion (49 billion pounds) in the year ending March 2018.

With the latest U.S. tariffs on Chinese goods, India fears Beijing could also re-route exports of electronic items, toys, furniture and organic chemicals to India through other Southeast Asian nations.

New Delhi and Beijing have been negotiating over greater market access as China wants to exports milk products and apples to India while New Delhi wants to sell China bovine meat, sources said.

(Reporting by Neha Dasgupta; Edited by Martin Howell)

By Neha Dasgupta

Stocks treated in this article : Tata Steel, Steel Authority of India, JSW Steel
Stocks mentioned in the article
ChangeLast1st jan.
JSW STEEL 4.37% 288 End-of-day quote.-6.11%
STEEL AUTHORITY OF INDIA 5.30% 51.65 End-of-day quote.-8.34%
TATA STEEL 4.19% 484.15 End-of-day quote.-7.08%
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Financials (INR)
Sales 2020 834 B
EBIT 2020 138 B
Net income 2020 64 129 M
Debt 2020 491 B
Yield 2020 1,15%
P/E ratio 2020 10,66
P/E ratio 2021 9,96
EV / Sales 2020 1,42x
EV / Sales 2021 1,31x
Capitalization 692 B
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Mean consensus HOLD
Number of Analysts 28
Average target price 297  INR
Spread / Average Target 3,1%
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Managers
NameTitle
Sajjan Kumar Jindal Chairman & Joint Managing Director
Seshagiri Rao Venkatasathya Metlapalli Joint MD, Group CFO & Executive Director
Surender Ranade Executive Director-Operations
Rajeev M. Pai Chief Financial Officer
Sinha Dheeraj Chief Information Officer
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