India faces Catch-22 on steel capacity at G20’s China meet

The U.S. will seek discussions on the reasons for excess capacity in steel

India will tread a cautious middle path when a simmering battle over global ramifications of excess capacity in steel takes centre-stage at the G-20 Summit in China.

Ahead of the September 4-5 Summit at Hangzhou (China) of the 20 major global economies, the U.S. has already mounted pressure on China to drastically reduce its steel capacity, claiming that the ‘dumping’ of the commodity in various countries has been hurting steel producers across the world.

U.S. Treasury Secretary Jack Lew was quoted as stating that U.S. President Barack Obama will demand action at the G20 Summit on excess capacity in steel as it “distorts markets and the environment, harms our workers and runs counter to our efforts to achieve strong, sustainable and balanced growth.”

Low-profile role

Sources said that India will, however, play a low-profile role in the discussions on the topic as it is aware of the growing needs of its user industries — which currently depend on a mix of imported and locally-made steel to meet their requirements.

The U.S. at the G20 Summit will seek discussions on the reasons for excess capacity in steel as well as reforms & regulations in the global steel industry, including in China, to address the problems stemming from excess capacity, according to the sources involved in the recently concluded India-US Strategic & Commercial Dialogue. They said some countries have blamed nations including India, South Korea, Italy and Taiwan for supporting measures that have been leading to excess capacity in steel.

However, explaining the reason for New Delhi’s cautious approach, they said, for India, it will be a ‘Catch-22’ as it is not only the third largest steel producing nation, but was also among the top 10 steel importers in 2015. This means, the interests of local producers and user industries will have to be kept in mind while taking a stance, the sources said.

Besides, the Centre wants more foreign investment in India, including in the steel sector, as part of the ‘Make In India’ initiative aimed at boosting local manufacturing and exports, they said. It will send a wrong message if India’s approach is seen as ‘protectionist.’

OECD Meet

The G20 Trade Ministers had in July recognised excess capacity, especially in steel, as a global issue that needs “collective responses.” They had stated that attention must be given to subsidies and other forms of government-related support as they can lead to market distortions and global excess capacity.

It was also decided that the G20 steelmaking economies will participate in the OECD Steel Committee meeting slated for September 8-9, 2016 to tackle the issue. They also agreed to “discuss the feasibility of forming a Global Forum” to share information on global capacity developments as well as on governmental policies and support measures. In India, recently the ministries of steel, finance and commerce & industry held discussions in this regard. A representative, most likely from the steel ministry, will take part in the OECD-related discussions and a study, they added.

To counter a surge in cheap imports of steel, which was hurting local steel makers, India had taken measures including anti-dumping duty, safeguard duty and Minimum Import Price. India had also brought out an order banning the manufacture and distribution of stainless steel products that do not comply with the the ‘Bureau of Indian Standards’ mark.