Major steelmakers argue that growing imports are dragging prices lower, hurting their margins as they commit significant capital expenditure for capacity expansion.

“It is imperative that the domestic steel industry is safeguarded from cheap imports from China, Vietnam, and Indonesia,” said Ranjan Dhar, director and VP of sales and marketing at ArcelorMittal Nippon Steel India. “Particularly concerning is China’s strategy of selling the metal below the cost of production, which poses significant challenges for both Indian and global players. This impact is further exacerbated for Indian companies that are in the midst of a heavy capex cycle.”

India is set to become a net importer of steel in the first quarter of FY25, according to data from BigMint, a market research and consultancy firm. Figures based on provisional data for June reveal that in Q1 of FY25, imports are slated to rise to 1.95 MT (million tonnes) compared to 1.51 MT of exports.

The consultancy firm said this is due to the surge of imports from Vietnamese firm Formosa Ha Tinh, which booked import orders for about 295,000 tonnes (t) over May-June. China continued to offload its surplus produce on foreign shores, that too at rock-bottom prices. Chinese steel shipments into India touched 125,000 tonnes in Q1.

Impact of tariffs

However, imposing tariffs could decouple the Indian market from the global steel industry, resulting in a surge in domestic prices, experts said.

“Imposing tariffs on steel imports could also result in prices going up in the domestic market, leading to an increase in cost for user industries of steel like automobiles, consumer goods and infrastructure. This could even result in increased domestic inflation,” said Rohit Sadaka, director & head material diversified at India Ratings & Research.

Experts said Indian steelmakers have no room to increase the price of steel in the domestic market even though demand is robust because of a subdued global environment. Global prices of steel are muted due to weak demand, resulting in oversupply.

Subsequently, in today’s open market, an increase in domestic prices would result in Indian steelmakers losing market share to cheaper imports. For instance, domestic trade-level hot rolled coil prices, ex-Mumbai, averaged ₹53,533/t ($641/t) in Q1, whereas the landed price of material imported from countries with free trade agreements was ₹51,100/t ($612/t) and that from China was ₹48,900/t ($586/t). The gap between domestic and import prices ranges from about ₹2,400/t to ₹4,650/t.

China remains one of the largest and lowest-cost suppliers of steel globally. The US and Europe have started to impose restrictions on Chinese steel imports. Experts said this can worsen the oversupply situation, potentially increasing cheaper steel supplies from China to India.

India produced 140.8 MT of steel in 2023, according to the World Steel Association. The country aims to reach 300 MT of steel production capacity by FY31 under the National Steel Policy 2017.

“To be sure, domestic steelmakers are not making losses at current price levels, but their margins are being squeezed at a time when they are heavily investing in capacity expansion. Simply imposing tariffs on steel imports will not be very helpful as India has free trade agreements with other major steel suppliers like Japan and South Korea,” Sadaka said.

Subsequently, steel exports from India have remained sluggish during the current fiscal, with provisional data for April-June showing a 36% year-on-year drop to 1.51 MT from 2.35 MT in the same period in FY23, BigMint reported.

It is likely that imports may surge in the coming months as bookings done now will arrive in July-August, while exports will remain slow due to the holiday period in Europe, which is now a key market for Indian mills.