On Saturday, the government decided to impose export duties on critical steel-making raw materials such as iron ore and pellets.
The export duty on iron ore has been raised to 50% across all grades, up from 30% for lumps, and to 45 per cent for pellets, up from 0% previously. Furthermore, the government has increased the export tariff on hot-rolled and cold-rolled steel goods from 0% to 15%.
Import duties on some raw materials, such as PCI and coking coal, have been reduced from 2.5% to zero, while met coal, coke, and semi-coke have been reduced from 5% to zero.
Due to these export duty hikes, Indian steel firms could be forced to cancel European orders and suffer losses after an overnight decision to impose export taxes on steel products, V R Sharma, managing director at Jindal Steel and Power, told Reuters.
Sharma said Indian steelmakers have about 2 million tonnes in pending export orders, mainly to Europe, which are stuck in ports or in various stages of production.
"This could possibly lead to force majeure. And the customer has done no wrong here, and he doesn't deserve to be treated that way, "he said.
The decision could raise industry costs by as much as $300 million, he said.
"We alone have 260,000 tonnes of orders taken when export duty was zero," Sharma told Reuters.
According to media reports, India exported 13.5 million tonnes (MT) of finished steel in FY22, compared with 10.8 MT in FY21. In contrast, domestic steel consumption stood at 106 MT during the same period, up from 94 MT in FY21. India's iron ore exports stood at 15.3 MT in FY22, while that of iron ore pellets stood at 11 MT.
Due to the Russian - Ukraine War, domestic steel prices had risen amidst rising input prices, largely coking coal. Domestic hot-rolled coil (HRC) prices surged to ₹76,000 per tonne in April 2022 from Rs39,200 per tonne in March 2020.
India meets 85 per cent of its coking coal requirements. While Australia remains the main buying destination, some of the requirements are met by countries like South Africa, Canada, and the US.