India's steel industry faces challenges as Chinese exports continue to rise

India’s finished steel imports surged 41.3 per cent to 4.7 million tonnes (mt) in the first half of this financial year compared to the same period last year. Country-wise data for the first five months show China continues to lead the pack with the largest share in total finished steel imports with 30.5 per cent.
 

As Dragon Land grapples with economic challenges, it is becoming an increasing concern for the steel industry, impacting not only India but the entire world. Beijing’s latest measures to boost the economy and the beleaguered property sector are unlikely to fix the problem.
 

Importance of being China
 

The Olympics were awarded to Beijing in 2001, and until 2008, when it actually happened, the production of the alloy grew rapidly.
 

The main venue, the Beijing National Stadium, or the Bird’s Nest, was said to have consumed 110,000 tonnes of steel — the largest steel structure ever built at that time.
 

But consider the overall numbers. In 2001, China’s steel production stood at 148.9 mt, which increased to 500.5 mt in 2008. As of 2023, it was at 1,019.1 mt, according to World Steel Association (WSA) figures — accounting for 53.97 per cent of world steel production. India, second in the league table, was at 140.2 mt.  
 

The property sector in China accounted for about a third of domestic steel consumption at peak level. But a downturn since 2021, coupled with overall weak demand, is snowballing into a global problem.  
 

Reports indicate China is on track to export more than 100 mt in 2024 — the most since 2016.
 

India’s concern
 

The deluge of exports from China is hitting Indian steelmakers in more ways than one. Cheaper products from the country flooding the world have impacted India’s competitiveness in export markets.
 

Numbers reflect this. In the first half of the current financial year, exports from India declined 35.9 per cent to 2.3 mt. In the domestic market, it dragged down prices. In the second-quarter of the current financial year, domestic steel prices were under pressure, falling 6 per cent compared to the first quarter.
 

ICRA’s Assistant Vice President, Sumit Jhunjhunwala attributes it to cheap imports from China and monsoon. Indian steelmakers — investing billions of dollars in expanding capacity — have been flagging concerns about predatory pricing of imports. Especially as major economies are putting trade barriers
 

Global steel markets are becoming increasingly competitive, notes ArcelorMittal Nippon Steel India (AM/NS India) Director and Vice President - sales & marketing, Ranjan Dhar. “Countries are either imposing trade barriers or increasing their own production, reducing the demand for Chinese steel. This makes India, a rapidly growing market, more vulnerable,” he says.

Another major steel producer says it is imperative for India to take action on imports. “Otherwise,” it says, “India will become a dumping ground because surplus steel from the rest of the world will flow into the country as other economies are still facing challenges.”
 

During April–August 2024, consumption of finished steel increased 13.8 per cent compared to the same period last year.

“India must proactively implement safeguard measures to reduce its reliance on imports and promote domestic steel production to ensure atmanirbharta and long-term competitiveness,” Dhar adds.  
 

Alok Sahay, secretary-general, Indian Steel Association (ISA), points out that Chinese exports are worrying all the economies. “US, Canada, and European Union (EU) have taken concrete measures with a levy of 25 per cent of safeguard duty and now Turkey has levied up to 43 per cent of dumping duty,” he says.
 

“India has no safeguard measures against surge in imports from China. We are exposed to trade distortion by China.”
 

According to the industry, cheap imports from China are being rerouted through Vietnam under the India-Asean free trade agreement (FTA). An anti-dumping probe into imports of hot rolled flat products originating in or exported from Vietnam has been initiated by the commerce ministry’s Directorate General of Trade Remedies (DGTR) on complaints from steelmakers.
 

But a dumping investigation is a long-drawn process. The industry is understood to be pressing for a quick trade remedial measure, such as a safeguard duty, to prevent injury from cheap imports. Representations in this regard have been made, industry sources say.
 

Stimulus effect
 

China’s recent policy measures are likely to have little impact on its exports to other nations. But it has propped up prices in its home market. In India, too, prices have increased in recent times, though for more reasons than one. 
 

According to BigMint, a market intelligence and price reporting firm, long steel prices have surged, driven by restocking demand and active project-related buying. Rebar prices in the ex-Mumbai market have jumped by Rs 4,000 per tonne, with current levels at Rs 54,500 per tonne. This rise has been largely supported by the recent Chinese economic stimulus, which has influenced buying behaviour in India as well, says an analyst with BigMint.
 

In contrast, the flat steel market, particularly hot-rolled coil (HRC), has seen moderate price increases, with a rise of 

Rs 1,500 per tonne, bringing current prices to Rs 48,500 per tonne, largely due to increasing production capacities.
 

The stimulus has helped boost sentiment globally. ICRA’s Jhunjhunwala says steel prices in China have increased 16 per cent since the announcement of the stimulus package. “This will drive prices globally. In India, prices have increased by 4 to 5 per cent even though some increase was due post-monsoon.”
 

Will it sustain? Sehul Bhatt, director-research, CRISIL Market Intelligence and Analytics, says the positive sentiment surrounding the stimulus led traders to increase steel prices. 
 

“Although this price rally will be short-lived, as the impact of the positive sentiment fades and supply and demand rebalance, the recent price hike has narrowed the price differential between imported and domestically manufactured flat steel,” he adds.
 

Export surge to continue?
 

Media reports from China indicate that the export push from the country will continue as demand continues to be weak.
 

China’s steel exports, at the current run rate, are expected to remain high, between 110 and 115 million tonnes. “While stimulus measures by China may boost its domestic consumption, particularly long steel, the country is unlikely to significantly curb exports to the global market, unless it reduces production by 5 to 7 per cent,” says AM/NS India’s Dhar.
 

The World Steel Association has made downward revisions to its 2024 steel demand outlook for most major economies, including China. In contrast, it expects India to maintain its strong momentum with the “robust” growth in demand projected for 2024 and 2025.
 

But will imports slow down the domestic steel growth story? All eyes on the government.

RISING IMPORTS
 

India’s finished steel imports surged 41.3% year-on-year (Y-o-Y) in the first half of this financial year; exports plummeted 35.9%
 

In the first five months of the financial year, China was the largest export partner, accounting for 30.5% of total finished steel imports
 

South Korea followed with a 26.8% share, Japan with 24.6%, and Vietnam with 7%
 

Imports from China, Japan, and Vietnam rose 31.7%, 130%, and 52% respectively