End of MIP could lead to price weakness in Indian steel market – Moody’s

Price volatility may hit India’s steel market if the minimum import prices imposed on various steel products are not extended beyond August, Moody’s Investor Service said.

India has taken several measures over the past year to protect the domestic industry, including raising duties on steel imports from non-FTA countries, safeguard duty on certain grades until March 2018, the ratings agency said in a statement.

It also includes minimum import price (MIP) for some 173 grades of steel imported into the country. The MIP in its current form will remain in place until early August 2016, it added.

“Absent an extension of the MIP beyond this date or a similar alternate protectionist measure, domestic steel prices will remain weak and volatile and will reflect the global steel oversupply amid slowing steel consumption in China,” Moody’s said.

It further said that protectionist measures by the Indian government in the form of import duty hikes, safeguard duties or MIP will help the domestic steel industry.

“However, uncertainty remains as to whether the MIP will be extended beyond August 2016 or replaced with similar duties,” Moody’s added.

Moody’s said it believes that slowing demand in China — the world’s biggest consumer and producer of steel products – will continue to prompt Chinese steel makers to look overseas to sell excess supplies and pressure steel prices globally.

“Our expectation that protectionist measures by the Indian government will continue to support steel prices and the company’s ongoing cost-saving measures,” it added.

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