Industry
Bruised by rising imports, steelmakers pin New Year hopes on safeguard duty
Summary
- A safeguard duty, which is a temporary measure to protect the domestic industry from cheap imports, could finally arrest the slide in steel prices, industry experts said. The duty could be to the tune of 25% of import price, as per media reports.
Mumbai: The commerce ministry's investigation into imports of flat steel products and a likely safeguard duty to curb their shipments have sparked optimism of a turnaround for Indian steelmakers after a tepid year marred by slipping sales price and shrinking margins.
A safeguard duty, which is a temporary measure to protect the domestic industry from cheap imports, could finally arrest the slide in steel prices, industry experts said. The duty could be to the tune of 25% of import price, as per media reports.
“India may impose a provisional safeguard duty, likely in the last quarter of FY25. The extent of the duty will be determined by the level of injury sustained by Indian mills during the investigation period," said Dhruv Goel, chief executive officer of market intelligence firm BigMint.
“This measure will curb further declines in steel prices, which have already dropped more than 10% in 2024," he said.
A senior executive at one of India’s top steel mills concurred.
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“Imports at prices below the cost of production have injured the domestic steel industry through 2024, and prices have dipped below pre-covid levels in some cases," this executive said, requesting not to be named. “Protection from cheap imports is the need of the hour."
Prices of benchmark hot-rolled coils (HRC) of steel have declined to an average of ₹48,160 per tonne as of November, lowest since December 2020, as per BigMint data.
On Friday, the Directorate General of Trade Remedies (DGTR) launched an investigation to determine whether a safeguard duty on steel imports was necessary amidst a surge in imports.
“2024 has been a transformative year for the global steel industry, with China significantly disrupting market dynamics," said Ranjan Dhar, director and vice-president, sales & marketing, AM/NS India.
“As domestic steel consumption in China declined, production cuts did not keep pace, leading to an excess production of approximately 135 million tonnes—nearly equivalent to India’s total annual steel demand," he said, adding that a chunk of this surplus steel made its way to India, both directly and indirectly, exerting pressure on the margins for domestic steelmakers.
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India’s steel imports have gone up by 52% between April and October this year to 5.38 million tonnes, as per BigMint data. Chinese steel shipments to India more than doubled year-on-year to 1.61 million tonnes during this period.
Outlook for 2025
While the extent of steel imports in 2025 will depend on the imposition of any safeguard duty, the demand outlook remains robust, experts said.
“In 2024, factors like the general elections, state elections, and an extended monsoon season temporarily impacted steel consumption. Looking ahead to 2025, even if monsoon trends remain consistent, we anticipate an upswing in steel demand, driven by increased government spending and infrastructure development," Dhar said.
But a significant recovery in steel prices is unlikely in 2025 even if a safeguard duty is levied on imports, experts warned. This is due to the ongoing addition of new capacities by all leading steelmakers and subdued exports, which is expected to keep domestic supply levels elevated.
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“Given the ongoing large capacity expansion plans, the steel industry’s capacity utilization is therefore slated to slip below 80% now after a gap of four years," said Ritabrata Ghosh, vice-president & sector head – corporate ratings, ICRA Ltd.
Other key factors to watch out for in 2025 include sentiment in the Chinese real estate sector, which is the largest consumer of steel globally, and the trade policies of the new Trump administration that will take over in the US in January, he said
“While domestic steel demand would remain resilient going forward, a meaningful recovery in buying activity in the Chinese property market, India government’s trade policies to check rising steel imports, and global growth outlook following Trump 2.0 remain the key themes that would drive domestic steel prices in 2025," Ghosh added.
