Trump tariff shadow over metal industry's Rs 8.6 trillion capex push

Higher US metal tariffs come even as the industry has announced record investments in additional capacity in the last few years. 

The total value of projects under implementation is around Rs 8.6 trillion, shows a Business Standard analysis of data from tracker Centre for Monitoring Indian Economy (CMIE). This is 78 per cent higher than the Rs 4.8 trillion worth of projects under implementation for the metal and metal products segment seen as of December 2019. There are 351 such projects under implementation as of December 2024, the highest in data going back to 2010 (see chart). 

 

The US President announced a 25 per cent tariff on steel imports into the US and a similar 25 per cent tariff on aluminium on February 10. The resultant cheap imports from countries looking to dump their metals at extremely low prices is expected to hit the profitability of Indian steelmakers. 

“A lot of capex has been committed, especially in the steel and steel product segments. Depending on the pricing situation, one might see some of the projects going on hold or slower than before till there is more comfort on the demand supply balance,” said independent market expert Deepak Jasani. The higher US tariffs could result in China looking to divert US imports into Asian countries and India could be flooded as well unless there are steps to address the issue through our own tariff measures, said Jasani. He added that the impact is likely to be felt more by steel which faces more of a demand-supply mismatch rather than aluminium or copper where the gap between demand and supply is not as large. 

End-users could see some improvement in their profitability mix, suggested Dhiraj Sachdev, chief investment officer at asset manager Roha Venture. Construction, infrastructure, automobiles, ship-building and railways are among the sectors which are heavy users of metal, he said. Some of the companies have clauses which require the passing on of changes in the cost of some materials on to the customer, these may not benefit as much from lower steel prices. Others including builders, developers, some manufacturing and automobile companies are likely to gain, according to Sachdev. “They are already benefiting,” he said. The announcements on new projects had continued into the December 2024 quarter. Companies announced 218 new projects (or one new project every couple of days) in 2024 alone. The new project announcements are near record-highs. Around 65 projects were completed in 2024. 

The Andhra Pradesh government announced that ArcelorMittal through a joint venture with the Japanese Nippon Steel is considering a Rs 1.4 trillion steel project in Andhra Pradesh in the Anakapalli district. The firm is reportedly an integrated steel plant with 17.8 million tonnes capacity according to a report in November 2024. Chairman of the JSW Group Sajjan Jindal announced plans for a Rs 1 trillion investment in Maharashtra’s Gadchiroli district to set up a steel plant with 25 million tonne capacity. The first phase is to be completed over the next four years, he said while speaking at a business conclave in Nagpur.  The overall investment is set to be made over a 7-8 year period. Tata Steel has announced plans to increase its capacity to 40 million tonnes per annum (MTPA) during its last annual general meeting in July 2024 compared to existing capacity of 21 MTPA.