Steel Prices: Indian Steel Demand Battles Chinese Imports

In July, India became a net importer of steel for the fourth time in the last year. And therein lies a tale of tariffs, changes in steel prices, and supply and demand. However, before discussing those issues, it’s important to revisit 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 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. This steel predominantly originated in China, though South Korea also contributed significant amounts. In July, for instance, imports outpaced exports by a margin of 74,000 tons. 

The Indian Steel Association’s (ISA) reaction has been a mix of concern and annoyance. In fact, 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 ISA’s secretary general, Alok Sahay, recently highlighted the need for systemic policy changes. He told the Business Standard that India’s prevailing “lesser duty” regime forces a minimum period of 15 months for implementing any trade-related actions. This, in turn, renders India susceptible to such situations. 

Sahay added that 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 Sends Steel Elsewhere

ISA’s data shows that during April-July of FY24, India witnessed a 63% surge in Chinese steel imports 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 several months, China’s steel demand continues to decline due to challenges in its property market. In response, steel companies continue 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.

Tata Steel CEO Forecasts Global Surge for Steel Prices

In an interview with the Hindu BusinessLine, CEO and MD of Tata Steel, T.V. Narendran, said the Chinese economic rebound following the easing of COVID-19 restrictions has been less robust than predicted. 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 an overall moderation in global steel prices. 

But according to Narendran, the situation could shift in the latter half of the fiscal year 2024. This is mainly due to impending production cuts, which 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 significant increase from the present range of $570 per ton. The CEO attributes much of this to sustained Indian demand to investments and a focus on improving infrastructure.

Tariffs and Steel Prices Remain a Point of Debate

Regarding the subject of tariffs, another prominent Indian steel personality, Sajjan Jindalhas, said he supports government intervention to counterbalance U.S. tariffs and Europe’s carbon tax via the implementation of 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 those firms’ significant state backing, highlighting the resultant inequitable competition. 

India’s Steel Sector Seeks FTA Overhaul

Meanwhile, the Hindu 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 unsure 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 has not 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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