How did India's stainless steel sector perform in 2024? BigMint explores

India's total stainless steel capacity is around 7.4-7.7 mnt for both long and flat products. The capacity of flats is around 5 mnt, while that of longs stand at 2.7 mnt.

Consumption of stainless steel is projected to have increased by 19% y-o-y in 2024 from 3.5 mnt in 2023. Current demand stands at 4-4.2 mnt and is further expected to increase by 2030. This growth aligns with India's economic expansion and substantial infrastructure investments, which are likely to drive stainless steel demand to 6.6-6.8 mnt by 2030.

The country's real GDP is expected to grow from $3.5 trillion in 2023 to $5.5-6 trillion by 2030, driven by government investments. The $1.4 trillion infrastructure plan (2019-2025) is poised to catalyse steel demand, while stainless steel demand may accelerate at 7-8% post-2025 due to expanding urbanisation.

India's current production of finished stainless steel stands at 3.7 mnt, as per provisional data. Y-o-y, production has increased by 14%.

Why are imports surging?

The industry faces challenges in the form of dumping of substandard stainless steel, particularly from China, impacting domestic manufacturers. India's imports from China in 2019 stood at around 0.1 mnt and as of 2024 have reached 0.6 mnt, which shows an increase of 548%.

Despite a 7.5% duty on imports of stainless steel flat products, shipments from China have been cheaper than domestically available material around the year. For instance, the landed cost of SS 304 CRC is at around INR 170,000-172,000/t, while domestic material is assessed at around INR 185,000-187,000/t. This means that imports from China have been cheaper by around INR 8,000-10,000/t.

Additionally, on 7 September, 2017, India's Ministry of Finance imposed an 18.95% Countervailing Duty (CVD) on stainless steel flat product imports from China for five years to provide relief to the domestic industry from subsidsed Chinese imports. However, the CVD was revoked in the FY'22 Budget which again increased the arrivals of stainless steel flat products from China.

Imports into India from countries like Indonesia, Vietnam, and Japan have been steadily increasing, benefiting from FTAs, which provide them with competitive advantages in terms of reduced tariffs and better access to the Indian market.

Therefore, besides increased consumption, trade dynamics are playing a key role in driving India's imports. India has the capacity to cater to domestic needs but capacity utilisation stands roughly in the range of 50-60% due partly to high imports but also because to produce stainless steel, raw materials like SS scrap, mild steel scrap and ferro alloys are used. However, due to limited domestic SS scrap supply (25-30%), the industry relies heavily on imports, leading to challenges in securing adequate volumes.

Changing dynamics of semis & scrap imports

India's stainless steel (SS) scrap imports registered a significant decline of 15% y-o-y in 2024, with a total volume of 1.17 mnt, compared to 1.37 mnt in 2023.

Securing stainless steel scrap has become a challenge due to limited generation. Imports have also gone down significantly post the Red Sea crisis which caused delays in shipments and nickel price volatility.

According to BigMint, SS 304 scrap prices averaged $1,400/t in 2024, down 4% from $1,460/t in 2023. Despite this drop, buyers favoured domestic scrap due to its cost advantage. In Delhi, domestic SS 304 scrap was priced at INR 119,000/t, cheaper by INR 3,000-4,000/t compared to imported material, with landed costs at INR 122,000-123,000/t.

Additionally, India's scrap imports from the EU-27 will face significant challenges following the revised Waste Shipments Regulation (WSR), effective 11 April, 2024. The new rules impose stringent controls on scrap exports to non-OECD countries like India, with a ban on non-hazardous waste exports by 2027. If India fails to meet the EU-27 criteria for scrap exports from the EU-27, it will face difficulty in securing both stainless and ferrous scrap. This could lead to higher prices and limited availability, impacting India's stainless steel production, as the country relies primarily on the electric route of production.

In 2024, the EU supplied 11% of India's stainless steel scrap, totaling 0.12 mnt. The volume of stainless steel scrap dropped by 42% y-o-y from EU-27 in 2024, primarily due to the Red Sea crisis affecting both EU and Middle Eastern scrap.

Despite the decrease in scrap volumes, production remained on a growth trajectory due to the increased arrival of semis like SS 300 series slabs and billets. Indonesia has become a key supplier of 300-series semi-finished slabs, with imports rising 8% to 0.54 mnt in 2024. The increased availability of nickel pig iron and ferro-nickel has reduced the need for scrap.

Billet imports surged by 1,332% from 9,200 t in 2023 to 0.13 mnt in 2024, with Indonesia surpassing Sweden as the top supplier, significantly reducing India's reliance on scrap.

Raw materials landscape

Nickel: The nickel market in 2024 experienced volatility. Prices peaked at $20,000/t in April and May, spurred by the LME ban on Russian metals and unrest in New Caledonia. From June, prices began to decline, reaching a two-year low of $15,200/t by December as inventories surged to 163,748 tonnes, up 218% year-on-year. This trend aligned with the INSG's forecast of a 109,000-tonne surplus, underscoring the persistent oversupply in the market which will further pressure prices.

Ferro chrome: Domestic ferro chrome prices were under pressure for most of 2024, falling by around INR 1,110/t y-o-y. Key auctions conducted by OMC and Vedanta-FACOR significantly influenced pricing trends. Subdued demand from the stainless steel sector added to the challenges. From second half onwards, declining tender prices from China further weakened export opportunities.

Ferrous scrap: Yearly average prices of imported HMS (80:20) scrap from Europe to India (West Coast) stood at $383-384/t by the end of 2024, witnessing a drop of 8% from the previous year's average $416/t. This was due to weak demand from the steel sector and cheaper availability of domestic scrap and other raw materials like sponge iron. India's ferrous scrap imports are projected to drop by 25% in 2024 to 8.3 mnt from 11.03 mnt in 2023, despite a 10% rise in scrap consumption.

Ferro molybdenum: Indian ferro molybdenum prices continue to be driven by global market sentiments. In May last year, global shortage of molybdenum oxide, along with shipment delays due to geopolitical tensions, pushed prices higher. But, overall, prices fell by approximately INR 400,000/t y-o-y in 2024.

Outlook

The implementation of a safeguard duty in the near term may rein in imports, BigMint assumes. The creation of a 'level playing field' for domestic manufacturers is certain to boost capacity utilisation.

The removal of the 2.5% duty on ferro nickel in the last Union Budget is expected to lower production costs for Indian manufacturers as raw materials constitute about 70% of total sales costs. Moreover, expansion in crude steel production, particularly through blast furnaces, is set to reduce dependence on imports. However, the dependence on cheaper nickel sources is likely to spur imports of semis and NPI for some more time.

The increasing arrival of stainless steel semis might also further reduce the reliance on finished imports further boosting domestic production.