China cutting sub-standard steel capacity won't impact India much: Sunidhi Securities

Indian steel producers will now face less competition from low standard Chinese products.

Chinese politicians, on Wednesday, have asked for 100 million tonnes of sub-standard steel capacity to be cut. Earlier, the country had decided on a 50 million tonne capacity cut.

Of the entire sub-standard capacity, China produces only 30 million tonne.

The news will also boost prices for Indian steel as the competition in export markets too will reduce.

Chintan Mehta of Sunidhi Securities said that the output cut does not make much difference in terms of demand and supply. Theoretically, it is unlikely to impact the price, but sentimentally it will react positively.

RK Goyal, MD of Kalyani Steel said that unless China reduces its production, no impact on steel production will be felt anywhere else.

Below is the verbatim transcript of RK Goyal's interview to Reema Tendulkar and Prashant Nair on CNBC-TV18.

Reema: Two part question: is any part of this 100 million tonne of sub-standard steel capacity exported to India and therefore will domestic players have a better chance now and does Kalyani Steel operate in this particular category of steel?

A: Kalyani Steel manufactures engineering steel long products. So, we do not operate in that space and we will not have any impact because of the same. At the same time, till the production in China goes down, there will be no impact anywhere in the world. At the same time, in India, there is anti-dumping duty on carbon steel, flat product and thermo mechanical treatment (TMT) bars and all. As such that material cannot come to India at competitive prices.

Prashant: Through industry channels, etc. is it possible to get confirmation that these production shutdowns are actually happening because a few weeks back we heard similar news flow and then there was other news which contrasted the fact that there had been shutdowns. What that news report said is that although the government wants these plants to shutdown, the mill owners themselves are not shutting this capacity down. How do we get some confirmation that this is actually happening and these are not just directives?

A: Actually somebody has to visit China to really do fact finding, otherwise it is very difficult to say anything based on reports coming out of China.

Prashant: So, you agree with that? It is kind of difficult to take this on face value that this is actually happening?

A: We never take it on face value.

Reema: Just in the near-term, on the back of this particular development, have we seen any upmove in steel prices?

A: I do not think there can be any increase in prices because of this. As such, I do not think anybody believes on such reports. Number two, even if there is a reduction in capacity in China - that does not mean that production has gone down. Number three, since there is an anti-dumping duty on most of the steel products in India, I do not think they can export metal to India.

Prashant: So, as of now, it is making no difference to prices or anything?

A: That is right.

Watch accompanying videos for more details.