In the new budget for 2018-19, the Indian government has made it possible to collect a 20 percent export tax on graphite electrodes to improve domestic supplies and promote the electric arc furnace (EAF) route of steelmaking in the country, however the export duty on the product in question remains nil for the time being. SteelOrbis understands that the 20 percent export tax might become effective anytime after April 1, the date the new budget comes into force, when the government deems it necessary to restrain exports.
A government official said that existing EAF-based steel mills are facing acute shortage of graphite electrodes with global buyers facing difficulties in sourcing the input from China and India graphite electrode exports have increased by around 49 percent during the past eight months.
Ensuring supply of the input is in line with the government’s stated policy of promoting EAF steelmaking, envisaging that it will account for an estimated 50 million mt per year of the country’s projected steelmaking capacity of 300 million mt by 2030, up from around 126 million mt at present.
Industry sources pointed out that, given the duopolistic nature of domestic graphite electrode production, it is difficult to increase domestic production.
The two Indian manufacturers - Graphite India and HEG Limited - have a combined installed capacity of 178,000 mt per year, controlling about 10 percent of the global graphite electrode market, second only to China.
The sources also pointed out that Indian graphite electrode manufacturers are also very cost-competitive in the global market, citing that last year ex-China graphite electrode export offers ranged around at $25,000/mt FOB while ex-India offers were on average lower in the range of $20,000-22,000/mt FOB.
According to the government official, the imposition of an export tax is in line with the government’s policy of “Make in India’ and, towards this goal, the levy will ensure high cost-efficiencies of EAF steel mills and lower input costs.