China has increased rebate on export tax on hot rolled steel to 9 per cent, giving a boost to the steel exports. This is also applicable to steel plate, sections and some stainless products and alloy steel. The rebate has come into effect from June 1, 2009. This is expected to bring down the Chinese steel prices.
Chinese steel traders are expected to reduce the benchmark HR prices to $490/tonne (Free On Board). This will make Chinese steel prices a tad more competitive in the international market. Worst affected could be the Indian steel companies who will face stiff competition from cheaper Chinese steel products. Chinese HR steel with freight is expected to be priced at $570/tonne, which is close to the domestic prices.
Indian steel companies were expecting a price increase due to the improvement in steel demand in the domestic market, but, with cheap Chinese imports, "it's a big negative for Indian steel companies", says a steel trader.
Prasad Baji, Senior Metal Analyst with Edelweiss says, " It's an important directional change, Chinese exports were down 70per cent. With the rebate the risk of Chinese exports to India increases."
Indian steel stocks led the decline on the Sensex with the BSE Metal Index down 6.51per cent. Biggest draggers on the BSE Metal Index were the largest steel companies, Steel Authority of India ended down 9.01 per cent, while, Tata Steel, JSW Steel, Ispat Industries showing over 10 per cent decline each.
The large steel imports expected from China, may, however, even strengthen the case for the demand for an Anti-dumping Duty in steel in India. Indian steel companies have been lobbying hard for it to make the Indian steel market more competitive for the foreign players and giving the domestic companies an edge over others.
Source : NDTV.COM