In July, India became a net importer of steel for the fourth time in the last year. And therein lies a tale of tariffs, steel prices, and supply and demand. But before we get into that, let’s go over the facts.
A recent report by India’s Steel Ministry revealed the country became a net importer of steel for the first time in the ongoing fiscal year and the fourth time in a calendar year. Throughout this month, the country imported a cumulative 587,000 tons of steel, while exports amounted to 513,000 tons. Meanwhile, both imports and exports grew by more than 30%.
Analysts attribute this discrepancy to the surge in imports of competitively priced steel, predominantly from China and some from South Korea. Indeed, imports outpaced exports by a margin of 74,000 tons in July. The Indian Steel Association (ISA) remains quite miffed by this development. They are also a little concerned. The organization now says it will take up the matter of this sharp upsurge in imports with the Indian Government. This means it will likely call for corrective measures (read: tariffs) to address the evident trade distortions.
Representing India’s steel manufacturers, the association’s secretary general, Alok Sahay, recently underlined the need for systemic policy changes. He told the Business Standard that the prevailing “lesser duty” regime in India leads to a prolonged minimum period of 15 months for implementing any trade-related actions. This, in turn, renders India susceptible to such situations.
Sahay said the organization plans to formally communicate this concern to the government. “To ensure fairness, it’s crucial to effectively counter trade imbalances caused by exporting nations in a “timely manner,” he said.
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Dropping Infrastructure Demand in China Continues to Send Steel Elsewhere
ISA’s own data shows that during April-July of FY24, India witnessed an increase of 63% compared to the corresponding period last year. Meanwhile, steel imports from South Korea saw a marginal decline of 4%. Incidentally, ISA sources its data from the Joint Plant Committee (JPC), a government-empowered entity responsible for collecting statistics on India’s iron and steel industry.
As reported by MetalMiner over the last months, China’s steel demand continues to decline following challenges in its property market. In response, steel companies had to export to countries like India. And though steel production remains in a global slowdown, China’s output experienced a 2.5% rise, reaching 627 MT between January and July 2023.
In an interview with BusinessLine, CEO and MD of Tata Steel TV Narendran said the Chinese economic rebound following the easing of COVID-19 restrictions has been less robust than forecast. However, the rest of the world, especially India, remains on an infrastructure uptick. The combination of these two factors led to a significant increase in steel exports from China and a moderation in global steel prices.
But according to the Tata Steel CEO, the situation could shift in the latter half of the fiscal year 2024. This is due to impending production cuts, as such cuts would inevitably lead to a rise in steel prices. Indeed, Narendran expects steel prices to climb within the range of $600 to $650 per ton, a rise from the present range of $570 per ton. The CEO attributes much of this to sustained Indian demand driven by investments and a focus on improving infrastructure.
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Tariffs and Steel Prices Remain a Point of Debate
So far as tariffs are concerned, another prominent steel personality, Sajjan Jindalhas, said he supports government intervention to counterbalance U.S. tariffs and Europe’s carbon tax by implementing a corresponding levy. Jindal feels this is necessary to level the playing field for Indian firms, including his own steel company, JSW Steel Ltd.
In an interview with Bloomberg, Jindal urged India to establish non-tariff barriers to counteract steel imports supported by state policies. He also advocated imposing duties on Chinese steel due to the significant state backing, highlighting the resultant inequitable competition.
Meanwhile, BusinessLine recently asked Tata Steel’s Narendran whether there was a need for India to rework the Free Trade Agreements (FTAs) due to increasing steel imports. Narendran responded that he was not too sure whether there was any room for renegotiating the FTAs.
Nevertheless, the data concerning the FTAs established with Japan and Korea showed they export more to India than India exports to them. This dove-tails with the steel industry’s perspective that India hadn’t really benefited from consenting to remarkably low tariff levels.
The top steel honcho feels India needs to examine how it could attract steel suppliers interested in the Indian market. In this case, the goal would be to have them invest, manufacture steel locally, and sell within India itself.
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