The industry fears that these imports, and the share of zero-duty segment, will further jump, if RCEP comes into effect.
“India’s one-sided trade with FTA-partners has particularly impacted the steel sector, which is extremely capital intensive and requires sustained performance to recover its investment and carry out expansion activities in-line with the growing demand,” said Acharya.
“The current slowdown along with elevated imports have made the circumstances very difficult for the steel sector. We welcome the proposed changes in Government’s policy to boost exports, but there is a lot of work-in-progress on trade-policy for keeping imports in-check,” he added.
The trade agreement
The RCEP, which may come into effect from November, will allow its 16 member countries to freely trade goods in each others markets without any tariff barriers. It includes 10 members of the ASEAN, and six free trade partners, including China, Japan and South Korea.
Japan and South Korea are already among the major importers. In some of the months of this year, more than half of the steel imports originated from these two countries. In April for instance, imports from Japan and South Korea made up for 57 percent of the monthly volume.
“With a free trade agreement, we may not benefit much, as these countries are much more technologically advanced than us, and can put up several kinds of non-tariff barriers,” pointed out a senior executive from the industry.
The slowing demand in the domestic market has already seen production coming down. JSW Steel’s production was down 13 percent in August.
The company, along with peers like Tata Steel, also reported subdued numbers in the first quarter of the financial year. While JSW Steel’s net profit fell 57 percent in the June quarter, that of Tata Steel plummeted by nearly 65 percent.
The outlook for the rest of the year, under present circumstances, looks equally bleak. Earlier this month, India Ratings and Research (Ind-Ra), lowered steel sector’s demand growth to 4 percent, from the earlier expectation of 7 percent.
It revised the outlook for the steel sector to stable-to-negative from stable for the remaining part of the financial year.
Two of the industry’s biggest clients – infrastructure and auto companies – are facing fresh challenges. While sale numbers of auto companies dropped the most in 20 years, in August, the order pipeline from the infrastructure sector has almost dried up.
Imports from RCEP countries will further squeeze the steelmakers.