India ends 2024 as net steel importer. Volumes to taper off in mid-to-long term?

• Korea, China top charts, flats comprise 94%
  
  
• China's aggressive dumping, FTAs act as catalysts
  
  
• Likely safeguard measure may stall future volumes
  
  

Morning Brief: India's mounting steel imports were amongst the major challenges faced by the steel industry last year. And, not without reasons. The country ended the year 2024 as a net steel importer with volumes touching 9.22 million tonnes (mnt) against exports of 7.60 mnt.

Finished flats comprised the lion's share of 94% of steel imports, growing 27% y-o-y to 8.65 mnt (6.80 mnt in 2023).

Imports comprise 8-12% of India's total production but these can damage the domestic industry and thus need to be addressed.

Country-wise break-up

South Korea topped the list of steel exporters to India with 2.86 mnt (2.50 mnt last year), up 14% y-o-y. China came a close second with 2.76 mnt, but interestingly these volumes were up a hefty 64% from 2023 levels of 1.69 mnt, bringing its share of 30% in the total imports almost on par with Korea's 31%.

Imports from Japan grew an alarming 97% y-o-y to 1.81 mnt (0.92 mnt) while surprisingly Vietnam's cargoes fell 34% in this period to 0.68 mnt (1.03 mnt).

Factors influencing Indian steel imports

China's aggressive dumping inflates volumes: China is a key player in the global steel exports space and India has been on its radar for quite some time now. It has been aggressively dumping steel here at rock-bottom prices much to the delight of end-using industries and consternation of domestic mills. Chinese HRC export offers on average, fell 12% in 2024 to $519/t CFR against $593/t in 2023. This aggressive stance stems from a shrinkage in domestic demand with the implosion of its real estate construction sector which used to consume the major 42% of steel around a decade back. Today, this share has reduced to possibly less than 24%. Volumes from China increased last year as its mills wanted to make the most of the Bureau of Indian Standards (BIS) licences before their expiry. Of the several mills, Bengang Steel's licence reportedly expired in early November last year while that of Baosteel Zhangjiang is slated to end in January 2025. However, Jiangyin Xing Cheng Special Steel Works has the leeway to export till October 2026 but its trade volume with India is negligible.

FTAs acting as facilitator: Volumes from South Korea swelled as its plant in India imports for further processing of material. Hence, these volumes are not so much a worrying factor, as much is the rise in volumes from China and Japan. India has free trade agreements with Korea and Japan and thus mills from here need not pay customs/import duties which act as a huge facilitator. Steel Secretary Sandeep Poundrik recently said, around 62% of steel imports are landing from free trade agreement countries at nil duty.

Japan eyes exports amid myriad challenges: Imports from Japan increased because of a few reasons.

1) Some cargoes were booked from Nippon Steel for AM/NS India, BigMint learnt.

2) However, overall, Japan too, like Vietnam, has been rather consistently dumping steel into India taking advantage of its free trade agreements with the country.

3) That apart, Japan is seeing a decline in domestic consumption amid a lull in its construction sector amid labour shortages, rising materials costs and new work hour regulations.

4) Machinery and engineering exports have declined because of global drop in demand for the same amid inflation, wars, and related factors.

5) Japan's auto production decelerated post-the safety test scandal at Toyota's small car unit, supporting the case for increased exports.

Vietnam volumes plunge amid dumping probe: Imports from Vietnam plunged because of two factors.

1) One is the non-renewal of expired BIS licences.

2) The anti-dumping investigations initiated by the Indian government against Vietnam around August last year. However, if an anti-dumping duty is applied on Vietnam, then it will get subsumed within a safeguard measure, if the latter gets implemented.

Imports reduce November onwards

Meanwhile, imports reduced markedly to around 0.01 mnt each in November and December from as high as 0.03-0.04 mnt in some of the previous months. Market sources put this down to a few factors.

1) Documentation delays at Customs led to a pile-up of cargo and clearances extended from the normal 1-2 days to 10-15 days. This increased costs due to escalated demurrage charges.

2) There was also a buzz that non-BIS grades were attracting penalties which discouraged importers.

3) In December 2024, landed prices from China and FTA countries were actually higher than those of trade-level ex-Mumbai material, defeating the cost viability factor for Indian buyers. For instance, in December last year, landed prices from China worked out to INR 49,500/t ($572/t) and those from FTA countries hovered at INR 47,900/t ($553/t). Domestic trade-level tags were lower at INR 46,900/t ($542/t). China's prices were consistently higher than domestic in the October-December, 2024 quarter.

Outlook

The Indian government is mulling an imminent safeguard duty of 25% on certain steel imports amid a pressing need to protect the domestic industry. The proposal was mooted at a joint meeting of the ministries of steel and commerce and top officials from tier-1 mills. Once this come into effect, steel imports may taper off in the medium to long term.

There are small quantities of specialised grades which are not manufactured at home and imported. There can be an exemption for these in the final order