The rating agency ICRA said that due to the increase in imports, the capacity utilization of the domestic steel industry in 2024-25 may fall below 80 percent for the first time since four years.
According to a source familiar with the situation, due to the surge in imports of steel from China and other countries, the Ministry of Commerce and Industry will likely recommend an increase in the duty on steel.
In a Friday notification, the Directorate General of Trade Remedies initiated an investigation on anti-dumping into certain steel imports in India.
There are concerns over the impact a steel tariff hike would have on downstream industries, but there is also a massive amount of capacity in China. The person stated that a recommendation for a steel duty was likely because several Western countries impose duties on Chinese steel and this steel could be diverted to India.
The Ministry of Steel asked the Ministry of Commerce for a 25% duty on steel. It cited that imports of steel from China increased by 80 percent to 1.61 millions tonnes between January and the end of July of this year compared to the 0.9 million tons during the same time period last year. Micro, Small and Medium Enterprises have warned, however, that a 25 per cent duty on steel products will negatively affect 8 lakh MSMEs.
According to the DGTR notice, the Indian Steel Association, which includes ArcelorMittal Nippon Steel India Limited (AMNS Khopoli Limited), JSW Steel Limited (JSW Steel Coated Products Limited), Bhushan Power & Steel Limited and Jindal Steel and Power Limited as well as the Steel Authority of India Limited is requesting the imposition of a "safeguard duty" on the imports of Non-Alloy and Alloy Steel Flat Products into India.
The applicant claims that imports have increased in volume in a sudden, abrupt, and significant manner, causing significant damage to the Indian domestic industry. The applicant also alleges that imports occurred at such high quantities and in such circumstances as they caused or threatened to cause serious harm to the domestic industry", DGTR stated in a notification.
ISA argued, that since the United States of America imposed a 25% duty under Section 232 of its Trade Expansion Act of 1962, multiple countries have taken trade remedy measures to combat steel imports. Evidence indicates that between 2019 and 2023, 129 trade remedies measures were imposed against steel products by different countries.
The slowing of demand in these countries is one reason for the existence of significant surplus capacity in China, Japan and South Korea. China's domestic policy measures have resulted in a decrease in consumption of steel long products that are used primarily in the real estate industry. Chinese steel companies have shifted a large percentage of production from long to flat products in order to mitigate the decline in consumption. These flat products are now exported on global markets.
GTRI, a think tank, argues that the main reason for imports is due to a gap between production and consumption of steel.
According to official statistics, India produced 139.15 MT of steel in FY 2024. It exported 7.5MT and consumed 136.29MT. Imports were necessary to meet the domestic demand, as there was little left over. Steel imports are only 6 percent of the domestic production and are mainly for large steel companies. They consist of 50 percent raw materials, such as scrap steel, and 40 percent specialized products that cannot be produced locally.
The ISA also stated that the Asean region will significantly increase its crude-steel production capacity. Approximately 75 percent of this expansion is due to Chinese investments. ASEAN is the top region for Chinese steel companies to invest across borders. They are investing heavily in overseas steel projects. ISA stated that the capacity of ASEAN will likely exceed regional steel demand by a wide margin.
ICRA, a rating agency, had predicted that domestic steel capacity utilization in 2024-25 would fall below 80 percent for the first four-year period due to the increase in imports. ICRA forecast that, along with record expansion plans, industry capacity utilisation would fall from 85 percent in 2023-24, to an estimated 78% in the current fiscal, the lowest level since four years.
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