KOLKATA, India - A steep rise in imports from Japan and Korea has Indian steelmakers up in arms demanding for removal of these two countries from a preferential free trade agreement (FTA), an industry source said Monday.

During April-July 2012 imports from these two countries have risen by 39 percent to over 992,000 tons against imports of over 599,000 tons in April-August 2011, creating an alarm within the domestic steel industry.

During the April-July 2012, total steel imports have jumped 55.7 percent to 2.99 mt, from 1.92 mt in the same period last year, according to Joint Plant Committee (JPC), which maintains the country's only independent steel industry database.

According to Joint Plant Committee that operates under the aegis of the steel ministry, the year 2011 saw a dramatic build-up of surplus capacity in steel globally.The surplus capacity accounted for about 500 million ton, or 25 percent of global steel capacity. JPC statistics bring out the stark figures that while global steel capacity was at 1,988 million ton, the demand for steel had shrunk to 1,492 million ton, due to the global economic slowdown.

According to Sajjan Jindal, chairman of JSW Steel: "They will (global surplus steel capacities) have to shut down. If imports surge further, the Indian government will have to levy anti- dumping duties. No country will want another country dumping their steel in its soil."

The rising trend in imports recently led Jindal to say total imports could reach up to 8 mt in 2012-13. Compared to this, total imports of finished steel increased marginally by about 2.4 percent to 6. 83 million tons in 2011-12 against 6.66 million tons during 2010-11.

While Chinese steel makers have been traditional bugbears as far as domestic steel industry is concerned, the surge in imports this time is flowing from South Korean and to some extent Japanese steel makers.

According to World Steel Dynamics, global steel demand is slated to shrink to low single digits of 3.3 percent after witnessing a growth of 14.1 percent in 2010 to 5.6 percent in 2011. China and India together will contribute in excess of 65 percent of incremental demand.