Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

India's steel industry has been a puppet of state protectionism this year. It was surprising, therefore, that even after New Delhi slapped anti-dumping duties on a range of imports, steelmaking stocks fell.

The extra duty will apply on hot-rolled flat steel products for six months. In theory, the levy offers more protection to domestic producers than the minimum import prices introduced in February.

Brokerage Jefferies estimates that local mills will now have more "headroom to raise prices," although their ability to stretch their necks may be questionable.

To see why, consider the domestic price of hot-rolled coil. At $410 per ton, it's nowhere near the government-mandated minimum import price of $445. With anti-dumping duties, the import price will rise to $474 per ton. Still, three straight days of decline in Tata Steel's shares makes it plain that investors don't expect Indian companies to manage anything close to a $64-a-ton price increase.

Protectionism Hasn't Boosted Prices
Indian steel prices have gotten some support from New Delhi's import safeguards, but the effect is waning
Source: Metal Bulletin

There are several reasons for that.

For one, the anti-dumping duty would only apply to hot-rolled coil and sheets, which may shift local demand to imported cold-rolled steel. The latter, as Jefferies notes, could become more attractive than producing it from domestic hot-rolled coil.

Furthermore, the levy will only apply to imports from China, Russia, Japan, South Korea, Brazil and Indonesia. Should domestic producers try to raise prices, end users could always find another source of imports not on the government's hit list. This will become even more important when New Delhi's floor import price, recently extended by two months, is junked.

So far, the measures have amounted to a rescue of a deeply troubled industry.

India's Steel Rescue Has Been Working
Minimum import prices have bolstered the bonds of major metal producers
Source: Bloomberg

But if steelmakers' debt-servicing capacity no longer spooks bondholders, it's only because slumping imports have given the firms an opportunity to produce and sell more of their own metal.

There's no sign yet of a sustained revival in Indian steel demand. Without that, the ability of Tata Steel and Bhushan Steel to charge higher prices will remain capped.

Useful as it has been in averting a disaster, the protectionist prop won't last forever.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Andy Mukherjee in Singapore at

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Katrina Nicholas at