India to emerge as net steel importer in H1FY'25; govt mulling measures

• Declining global prices attract Indian end-users
  
  
• Predatory pricing drags down domestic prices
  
  
• Higher import duties on Chinese steel probable
  
  

Morning Brief: India will continue to be a net steel importer in the first half of financial year 2024-25 (H1FY'25), forecasts BigMint. The trend actually started in the April-June quarter (Q1FY'25) of the current fiscal, and data corroborates that it will continue into Q2FY'25 (July-September, 2024) as well.

Data reveals, India's steel imports (including stainless steel) in H1FY'25 will be at a provisional 5.10 millon tonnes (mnt) whereas exports will hover at 2.80 mnt.

In Q2FY'25, imports may provisionally reach 2.90 mnt against estimated exports of 1.1 mnt. In Q1FY'25, imports had been higher at 2.22 mnt against a far lower 1.70 mnt of exports.

In Q4FY'24, however, India had remained a net exporter with 3.2 mnt compared to 2.30 mnt of imports.

It may be noted that around 80% of India's steel imports comprise of hot rolled coils (HRCs) and plates.

Factors pushing up India's steel imports

Declining global steel prices lure Indian buyers: Global steel prices have been in declining trend especially since May this year, making imports attractive for end-buyers in India. This trend is a function of the low demand trend persisting amid the myriad geo-political developments that have led to rising economic uncertainties across regions. Global inflation is forecasted to ease to 5.9% in 2024 from 2023 (6.8%). The global energy price index is also expected to decrease from 106.9 in 2023 to 104 in 2024. However, as per the latest Eurofer report, "The outlook for 2024 remains dominated by a worsening combination of uncertainties in energy prices, weak demand, inflation above target levels, severe geo-political tensions and economic challenges driven by high interest rates, despite initial monetary easing." Moreover, with China and the US, two of the largest economies, teetering on the verge of a recession, global consumption is set to take a hit, and will possibly further weaken steel prices much to the delight of Indian importers.

BigMint data reveals, Chinese HRC offers have fallen 13% from $542/t FOB in May this year to $474/t in August. Japanese offers lost 8% in this period at $525/t ($568/t) while the Russians lowered their prices by over 15% since January ($602/t) to $509/t last month.

Vietnam's largest mill Formosa Ha Tinh, rolled over its HRC prices across grades ($510-530/t CIF) for October sales.

Dumping at predatory pricing gains ground: Dumping at predatory pricing is exacerbating the situation, widening the spread with Indian trade-level HRC prices. For instance, domestic trade-level HRC prices, ex-Mumbai averaged INR 52,033/t ($623/t) in H1FY'25. Landed prices from China in this period were lower by INR 1,316/t ($16/t) at INR 50,717/t ($606/t).

Worse, landed prices from FTA countries (Vietnam and Japan) in this period averaged INR 2,316/t ($28/t) lower at INR 49,717/t ($594/t).

Alarmingly, landed prices from FTA countries have been falling m-o-m since March 2023 and, where China is concerned, from January 2024. For instance, imports from FTA countries hovered at INR 62,500/t ($747/t) in March 2023, when domestic trade-level HRCs were actually slightly lower at INR 60,300/t ($721/t). But current offers, assessed on 12 September, 2024, are grovelling at as low as INR 46,800/t ($559/t) against domestic's INR 48,900/t ($585/t)! Imports from China are cheaper by 19% at INR 46,300/t ($553/t) compared to January's INR 57,300/t ($685/t)! Needless to say, this scenario has been putting immense pressure on domestic prices.

Naturally, under such circumstances, imports from China (minus stainless less) catapulted 172% y-o-y over April-August 2024, and by 136% from Japan. Korea led with 0.94 mnt, up 8% y-o-y.

Outlook

The Indian government, taking note of the imports influx, is likely to take steps to curb the same. Steel minister H.D. Kumaraswamy recently said the Ministry of Steel will soon discuss with the Ministry of Finance on measures to curb imports which include possibilities of imposition of higher duties on imports from China. He agreed that rising imports, primarily from China, Japan, and South Korea, have contributed to a drop in local steel prices.

As per sources, an anti-dumping duty on Indonesia may also be slapped. The results of India's dumping probe into Vietnamese steel is also awaited.

Therefore, there are possibilities of an easing in import volumes in the medium term.