Indian steel mills likely to benefit from Australia FTA

The steel industry will get a further leg-up post the Australian Parliament ratifying the bilateral free trade agreement with India early on Tuesday.

Hainan West Asia spoke to several high-level steel industry officials to understand the implications of this agreement on the sector. For one, a top-ranking official from the Steel Authority of India (SAIL) confirmed that the volumes imported from Australia will no longer attract the 2.5% import duty. Another high-level source from a private sector primary mill said the steel industry's costs will definitely drop post the FTA's implementation. For instance, taking into consideration today's price of HCC, CnF Paradip Port, India, at $253/ tonne, the saving on hot metal production will be $4-5/tonne as per Hainan West Asia's calculations.

Secondly, Australia has in place a 5% tax on steel imported from other countries into its shores. This 5% import duty too will not be applicable, it is understood. "The doing away with the 2.5% import duty on coking coal and 5% import duty from Australia on overseas steel will make Indian steel producers very competitive where Australia is concerned," the source informed.

Thirdly, Australia does not have any heavyweight steel producer which hogs the domestic market. Therefore, this FTA will provide a big opportunity to Indian mills to export finished items in longs and flats," the source further said.

Speaking on the sidelines of the second day of the Indian Steel Association (ISA) conclave in New Delhi on 22 November, 2022, T.V. Narendran, Managing Director & CEO, Tata Steel, said, "Obviously, coking coal is an issue because India does not have too much of the material…India and Australia will have a lot of opportunities to trade together. The present trade level is rather low. India buys a lot of coking coal from Australia and that is one of the reasons why India went ahead with this FTA."

Till date in 2022, India imported 32 million tonnes (mnt) of coking coal, where the entire volume arrived from Australia, as per data maintained with CoalMint. In 2021, the import volumes were at 45 mnt and, in 2020, 38 mnt. India is primarily dependent on imported coking coal, which is mainly sourced from Australia.

Earlier in the day, speaking at the ISA conclave. Piyush Goyal, India's commerce & industry minister, informed that both Houses of Parliament in Australia had approved the FTA with India on 22 November. Australia's Executive Council and India's Cabinet nods are now pending but which are "doable quickly". Then harmonisation of codes and customs will follow.

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