A blanket ban against dumping of Steel is a must

During the recent month in a surprising shift India turned out to be net imported of steel during 2024. Without imports reaching almost 25% during the period of April-August over 40% of these imports came from China, making a significant shift in the market. During the month of July 2024 Chinese steel accounted for over 70% of India’s total steel imports which was the highest level in seven years. This flood of cheaper Chinese steel imports has put an immense pressure on the Indian steel makers where the average price for hot rolled coils in India fell to as low as ₹51,000 per tonne compared to a peak of ₹76,000 per tonne recorded in 2022. It is surprising to see that Chinese steel was being imported at as low as ₹48,000 per tonne undercutting Indian producers who were struggling to compete with these rock bottom prices. With Chinese steel prices below Indian production, cost domestic steel makers were experiencing significant marking pressure.

Slower demand growth during the monsoons has contributed to higher inventories creating a barter pressure on prices. Indian steel makers were forced to lower their prices to compete with Chinese imports which were unsustainable in the long term due to high production cost and capex. The international regulations also played a critical role in shaping the industrial outlook. The European Union’s new Carbon Border Adjustment Mechanism (CBAM) is also likely to have far reaching consequences for Indian steel makers. The carbon tax could add $100 to $190 per tonne to the cost of Indian steel exports to Europe significantly reducing competitiveness in one of India’s key export markets. Moreover several countries around the world including US & Canada are imposing tariffs as Chinese steel imports though India is yet to take significant action in this regard leaving domestic producers exposed to unfair competition.

Though Green steel projects are still on the cards including an MOU signed between JSW Steel and POSCO Group to set up a 5 million tonne integrated steel plant in India and a joint venture between JSW Steel and JSE to acquire the plant of thyssenkrupp Electrical Steel in India at a cost of ₹4051 crore. It is also evident that JSW Steel has slashed its capex plan for FY25 by almost ₹4000 crore from its original plan of ₹20,000 crore. A big challenge for the Indian steel makers is to tackle the huge inventory buildup of around 14 million tonnes up to September and which is up by almost 13.01% recorded a year ago. In spite of a dip in iron ore and coking coal prices, the pressure on margins are quite higher than what the raw material prices could offer. It is therefore time for the Ministry of Steel, Ministry of Commerce and Ministry of Finance to take definite steps for prevention of dumping by countries like China, Korea and Vietnam.

Let good sense prevail…..

Indian Steel Industry - Nitin Gadkari