25/02/28
Bearish Indian steel market awaits safeguard duty
Mumbai, 28 February (Argus) — 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. By Amruta Khandekar Send comments and request
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