Reuters reported that recently imposed export tax on carbon steel products has hit hard companies like JSW Steel and Usha Martin, who acquired subsidiaries abroad as part of a de integration strategy for manufacturing primary steel near raw material sources and sending it to finishing mills closer to the markets.

JSW Steel, which acquired 3 finishing mills for USD 900 million in the US as part of an intra family transfer in August 2007, has been exporting 40,000 tonnes of slabs per month to its plate mills in US Jindal United Steel Corporation, Saw Pipes USA and Jindal Enterprises.

Mr Seshagiri Rao finance director of JSW Steel said that these exports would now attract a duty of 15%. JSW Steel is working out the figures and will see whether it makes more commercial sense to procure the slabs locally in the US or to absorb the duty. Mr Rao said that "We may have to reconsider the slabs from the US market the request is not accepted.”

Mr Rao further explained that even if the company did not export the slabs to its international subsidiaries, the domestic market does not have enough rolling capacity to finish the products. JSW has a domestic rolling capacity of 2.5 million tonne against a total crude steel production of 3.6 million tonne.

Usha Martin exports 30,000 tonnes of wire rods and wire ropes per year to subsidiaries in Bangkok, Dubai, UK and the US. These exports account for 8% of annual production and will now be subject to a 10% duty.

Mr P Bhattacharya joint MD of Usha Martin said that it has made a request to the government. Usha Martin has a subsidiary in Thailand, Usha Siam Steel Industries Public Company, which manufactures 30,000 tonne of wire and wire ropes. It acquired Brunton Shaw in UK, which produces 12,000 tonnes of high end steel wire ropes.

He added that “Usha Martin has built a stock at Usha Siam for 3 months that could meet a part of the demand if the duty is not scrapped. Remaining supplies could be imported from Indonesia, China and Japan. For the UK and Dubai subsidiaries, Usha Siam could supply the special wires required.”