Indian steel mills call for immediate, short-term measures to combat imports surge

The global steel industry is undergoing significant upheaval due to geopolitical tensions, China's real estate crisis, and near-recession conditions in several developed economies. While these factors have led to excess steel capacity in East Asia and increased protectionist measures worldwide, India finds itself in a unique position. Despite being a global economic outperformer, India remains exposed to the impact of predatory steel imports due to a lack of robust trade protections.

Globally, surplus steel capacity has resulted in an aggressive export push by countries with excess production. Nations are increasingly adopting trade measures to insulate their markets from these surging imports.

Despite the global downturn, India has emerged as a beacon of economic stability with robust GDP growth, accelerated capex, declining inflation, and a reduced fiscal deficit.

India's steel imports witnessed an increase of 64% y-o-y to 4.62 million tonnes (mnt) in H1FY'25 as against 2.81 mnt in the H1FY'24.

Country wise-break up

China was the largest exporting country with volumes rising over 150% on the year to 1.43 mnt in April-September 2024, as compared with 0.57 mnt in the same period last year.

South Korea followed with 1.28 mnt (1.12 mnt), up 14% y-o-y basis.

Japan was the third largest exporter with volumes witnessing whooping rise of 159% y-o-y to 1.01 mnt in H1FY'25 as compared with 0.39 mnt in CPLY.

Import volumes from Vietnam were 80% higher y-o-y to 0.45 mnt (0.25 mnt).

However, India lacks effective trade measures to protect its domestic steel industry. The absence of substantial protective frameworks leaves the country exposed to unrestricted imports from Free Trade Agreements (FTAs) countries, particularly at zero percent tariffs.

The surge in cheap steel imports has severe consequences for the Indian steel sector:

Profit margin erosion: Indian steelmakers are struggling to compete with the lower-priced imports, which are squeezing margins.

Increased forex outflows: The reliance on foreign steel increases India's foreign exchange outflows, putting additional pressure on the economy.

Displacement of domestic demand: Imported steel is displacing locally-produced steel, diminishing demand for domestic products.

Threat to investments and employment: The profitability of local steel producers is undermined, discouraging further investments in the sector and putting existing jobs at risk.

India's steel industry is capital-intensive, resource-intensive, and requires a long gestation period for investments to yield returns. Given the current scenario, quick and focused trade actions are essential to protect the sector. Industry experts are calling for:

Shortened investigation periods: The timeline for assessing trade injury should be limited to three months, allowing for faster intervention.

Fast-tracked trade actions: Trade remedies, such as tariffs or quotas, need to be implemented within 6 to 12 months to mitigate long-term damage. Currently, trade measures can take up to five years, which is too long in a rapidly shifting global market.

Introducing "surgical trade actions" for short-term relief to address the pressing issues of predatory imports, the industry is advocating for a novel approach termed "Surgical Trade Action" This short-term trade remedy is designed to counter immediate threats, providing swift protection to India's steel market without the lengthy timelines associated with conventional trade actions.