China’s recent export policy changes aimed at controlling the price of steel in the domestic market could boost Indian steel exports and increase steel production in India, says Akshat Saraf, Director Sales & Marketing of Radha TMT in an exclusive interview with Davis Index. He believes that the cancellation of tax rebates offered for the export of several steel products bodes well for the Indian steel market.
From May 1, China withdrew the 13pc value-added tax (VAT) rebate on certain steel exports forcing steelmakers to focus on domestic markets instead of servicing the overseas markets. High production rates and rampant exports by Chinese mills had elevated the price of iron ore, coal and finished steel in the Chinese market, which had started to adversely impact the manufacturing industry.
Indian producers faced intense competition from Chinese exporters as they would undercut prices and make exports unfeasible for most Indian mills. Indian steel mills could benefit and aggressively target the export market amid weak domestic demand, said Saraf.
Most of the primary mills in India have remained unaffected by the global volatility in iron ore prices as they have their own captive mines. He added that the Chinese tax policy is truly advantageous for India because the domestic steel prices are approximately 25pc lower than international markets.
In addition, the COVID-19 situation, steel production and demand are likely to improve post-monsoon which could also buzz construction and infrastructure activities.
Radha TMT is the largest rebar manufacturer in Southern India. The company plans to double its production capacity as reported by Davis Index. The company looks to increase its billet and rebar export market. Semis sales are increasing compared to rebar.
Although the company aims to cater to more countries in the export market, it predominantly supplies to Southeast Asian markets. It also exports to Arabian countries, but due to geographical constraints and financial issues, it is yet to explore the South American markets.