Malaysian Threat Looms Over Indian Manganese Alloys Producers

In the absence of a safeguard duty on cheap imports from Sarawak, and with a steep power tariff, the Indian ferroalloys industry is at the receiving end.

In 2017, Malaysia contributed around 51% to Ferro Manganese exports to India which climbed northwards to more than 60% in the span of a year. Presently, Malaysia is the largest Ferro Manganese exporter to India, exporting 47,504 MT in the first half of the current year thereby contributing almost 65% of Ferro Manganese imports by India. With cheap manganese imports trickling in from the South Asian country, Indian producers are at a distinct competitive disadvantage and are clamoring for a government safeguard duty on imports of manganese alloys from Malaysia.

It is not unrealistic to expect that the government could consider a safeguard duty on Malaysian imports. India presently produces 3.5 to 3.6 MnT of ferroalloys. It is the largest seaborne exporter of Silico Manganese in the world and the ferroalloys industry is vital for the Indian steel industry. Massive imports of chips and fines from Sarawak in Malaysia have almost filled the Ferro Manganese industry. A year back, India was the fourth largest exporter of Ferro Manganese in the world. Most importantly, all this import is duty-free and it is from Sarawak which has a huge subsidy of power at a surprisingly cheap rate of Rs 2.25 per kWh.

The absence of a duty structure will likely be detrimental to the Indian ferroalloys industry, which is 60 years old and has come a long way. It is an irony that the Indian steel industry is amply protected by safeguard duties, but one of the crucial raw materials for the steel industry - ferroalloys - has been rendered globally uncompetitive in the absence of a safeguard duty on cheap imports from Sarawak. Many ferroalloys producers are of the view that this is sounding the death knell for the Indian ferroalloys industry.

Imports of cheap chips and fines from the highly subsidized nation have risen dramatically over the last few months. The threat is that sooner or later even Silico Manganese will start coming in. While India has proved that it is globally the most competitive in terms of Silico Manganese production, the government is yet to take steps to protect the interests of the domestic ferroalloys industry which earns precious foreign exchange for the country.

Domestic ferroalloys producers are of the view that Free Trade Agreements cannot be an excuse for eating up the domestic industry and the government should focus on safeguarding the interests of domestic producers first.

So, with an eye on the fact that Sarawak enjoys huge subsidy benefits unlike Indian ferroalloys producers, the government could either consider imposing a safeguard duty on imports or provide power at a rate equivalent to that of Malaysia in order to create a level playing field for Indian producers. It could also set up captive power plants for the domestic ferroalloys industry to continue manufacturing at a globally competitive level or switch over to hydro-power. It deserves mention that Sarawak has cheap access to precious hydro-power.

It is indeed difficult to understand that at a time when India is looking at expanding its steel-making capacity in a massive way over the coming decade, it is relying on cheap imports instead of focusing on bolstering its inherent raw materials base.

Although a few ferroalloys producers have set up their own captive power plants, in the absence of high-grade coal they, too, are reliant on costly imports at a time when the rupee is depreciating fast. The huge cess on coal has compounded their problems and, therefore, the pricing of the captive power plants has been rendered wholly uncompetitive. Domestic producers, as a result, are seeking urgent government intervention to safeguard the interests of the Indian ferroalloys industry.