Mounting global pressures, including impending US tariffs and risks of more imports from Asia-Pacific countries, have fuelled expectations of safeguard duties to shield Indian steel producers hit by falling prices.
The near-term outlook for Indian hot-rolled coil (HRC) prices, which fell by 15pc in 2024, remains bearish in the absence of strong demand from consumers and significant government spending. A drop in exports and rising domestic steelmaking capacities have also weighed on prices, squeezing producers' margins.
External pressures have escalated recently as several countries put up trade barriers, leaving top steel suppliers such as China with limited options for overseas sales. US president Donald Trump's move to impose 25pc tariffs on all steel imports from 12 March is the latest in a series of protectionist measures undertaken by western countries to protect their domestic industries.
Steel market participants anticipate an indirect impact of these tariffs on India, as Asian producers that supplied to the US market will now increasingly turn their attention to the country. India is considered a bright spot for long-term steel demand, given its infrastructure boom and economic growth potential.
Ratings agency Icra estimates about 4mn t/yr of steel supplied to the US by Asian countries such as Japan and South Korea, which until now had preferential market access, could be partly diverted to high-growth markets such as India.
Indian steelmakers are leveraging this situation to push harder for safeguard duties to limit HRC imports, particularly from countries with which India has a free-trade agreement (FTA), market participants said. Under the FTA, no basic customs duty is imposed on imports from countries such as Japan and South Korea, unlike China, which incurs a 7.5pc import duty.
Japan and South Korea combined accounted for roughly half of India's finished steel imports of 8.4mn t in April-January, according to ministry data. Total finished steel imports rose by 21pc on the year in the past 10 months.
Cheaper imports were one of the reasons for 2024's steel price drop, with Argus-assessed ex-Mumbai HRC prices falling to 47,250 rupees/t ($541/t) at the end of December, excluding goods and services tax, from Rs55,500/t at the start of the year. Inflows slowed towards the end of the year as weak steel market sentiment and the ongoing safeguard investigation kept traders risk-averse.
But in February, some consumers booked two vessels of Japanese-origin HRC for as low as $480-490/t cfr India for March shipment. Sluggish domestic steel demand in Japan and the blocked Nippon Steel-US Steel merger has raised the possibility that Japan will sharpen its focus on India, a steel market analyst said.
Vietnamese steelmakers Formosa Ha Tinh and Hoa Phat have also received their licence required to export HRC to India, raising concerns for domestic producers.
Safeguards a 'temporary' measure
Indian mills have asked for a 25pc safeguard duty on flat steel imports, but market participants expect the duty, if imposed, is likely to be about 15pc.
Once the duty is imposed, steel mills will increase prices imminently by as much as Rs3,000/t, sources said, but the resulting price increase in the trade market is likely to be temporary, especially if domestic demand conditions remain weak. Lower supply from mills has currently kept a floor on HRC prices, which were last assessed at Rs48,000/t ex-Mumbai today.
"Safeguard duties will buy time for steel mills over the next few months to hike prices and sales realisations," a north India-based distributor said. "While mills are confident about safeguards being imposed, the government will have to be cautious as it is also focusing on controlling inflation and supporting small businesses."
India's HRC export activity has been weak, with mills not making many formal export offers in recent days. This might be the case because they wish to sell at higher prices domestically once safeguards are imposed rather than sell at lower levels in the export market now, market participants said.
"Mills' wait-and-watch approach on exports is one of the reasons why I feel safeguards might be coming," a Mumbai-based trading firm said.
