Is India's steel trade balance getting tilted?

ISA writes to commerce, steel, finance ministries seeking intervention on imports

Indian steel mills rang the alarm bell on imports at cut-throat pricing, and an almost dried-up exports scenario which is disturbing the trade balance. So much so that the Indian Steel Association (ISA) has written to the Ministries of Commerce, Steel and Finance, saying that India "should act in time. Otherwise, it will be too late if we are not able to export", Dilip Oommen, President, ISA, and CEO, AM/NS India, and Executive Vice-President, ArcelorMittal, warned. He was speaking to SteelMint on the sidelines on the 4th ISA Steel Conclave in New Delhi recently.

Mr Oommen emphasized that India is seeing a disturbing trend of imports going up, exports coming down and Chinese steel production climbing up though there were indications it will come down. "Our assumption is China's steel production is reducing but remember their BF utilization rate is still at about 90%," he reminded.

He stressed that if Indian mills are not able to sell domestically because of the large amounts of imports coming in, "then how will the investments happen to take up the production capacities?"

Voicing similar concerns, Ranjan Dhar, Chief Marketing Officer, AM/NS India, said, India is a unique country where steel demand is good and growing. There is least amount of restrictions on imports, and humongous amount of restrictions on exports in the form of EU quotas, Section 232 and anti-dumping in the US. All mills are putting up capex and this needs to be funded. "If the margins are not there, no player will invest. Pulling up the capex from 150 million tonnes to 300 mnt and beyond is primarily being undertaken by the private players in India, for whom, there has to be an RoI, a business case. If the latter dissolves then it will be difficult to grow the capacities. In such a scenario, domestic demand will have to be fed by imports. This is a dangerous scenario and one which we need to be cautious of and avoid," he emphasised.

Speaking of imports to SteelMint, Amarendu Prakash, Chairman, Steel Authority of India, stressed: "This will always be under the scanner. We are not against imports, or trade. However, trade at unrealistic, predatory prices is something that we will always counter."

It may be mentioned that globally, certain countries - Japan, Korea and Vietnam - lean heavily on exports, by up to 45-60%. Their aggressive capacity expansion, with an eye on exports, is tilting the global trade balance.

India has been managing fine till now with a growing domestic consumption graph. The growth in capacities in India also had a domestic focus with an export dependence quotient of 10-15% which may decline to 6-7% in the current fiscal.

But experts at the conclave warned, this scenario cannot remain linear for a very long time and mills need to export although a situation has evolved where the markets have been captured by the other export-oriented geographies. "If that be the case, then India needs to have a stronger laws and trade barriers that will not allow imports," Dhar emphasised.

Imports

India's finished steel imports increased by 50% m-o-m to 0.57 mnt in October 2023 as against 0.38 mnt in September 2023, as per provisional data released by the Joint Plant Committee (JPC) under the Ministry of Steel. In April-October 2023, imports increased by 10.1% y-o-y to 3.470 mnt against 3.151 mnt in the same period last year.

Outlook

Officials feel, prices in Q4 will remain range-bound, and "not fall drastically". A key factor to watch out for will be coking coal prices, which have been highly volatile so far in the recent past. A government source told SteelMint that more than volumes, steel prices will be under pressure in Q4 because of imports at cut-throat pricing.