US President Donald Trump's 25% tariff sounds alarm for steelmakers

Even as US President Donald Trump raised tariffs on steel and aluminium imports on Monday to a flat 25 per cent, Indian 

steelmakers called for a safeguard duty and a level playing field, while aluminium players apprehended a downward pressure on prices. 

Trump signed proclamations imposing a 25 per cent tariff on all steel and aluminium imports into the US without exceptions or exemptions. On aluminium imports, the tariff rate was raised from the previous 10 per cent in 2018 to 25 per cent. The direct impact of the move is restricted to the stainless steel industry, which exported about 9 per cent of its total exports in value terms to the US. As far as carbon steel is concerned, the expected impact is a potential surge in imports due to trade diversion. 

In a statement on Tuesday, the Indian Stainless Steel Development Association (ISSDA) said if the tariffs were imposed, Indian stainless steel exports would face severe obstacles, disrupting global supply chains and escalating costs for manufacturers and consumers worldwide. “These represent a dual blow to India’s industry — severely limiting market access while escalating global competition,” Rajamani Krishnamurti, president of ISSDA, said.

  ISSDA has urged policymakers to engage in constructive dialogue to ensure that Indian stainless steel manufacturers can continue contributing to the global economy without facing “unjust trade restrictions”. 

  Abhyuday Jindal, managing director (MD) of Jindal Stainless, said Indian exports are subjected to 25 per cent tariffs under Section 232. “However, there is a mechanism in place wherein importers can file for exclusion. Based on the strategic pact between India and the US, up to 70 per cent of the exclusion requests are to be considered favourably by the US government.”

  From the carbon steel side, a large integrated steel player said direct steel exports to the US were negligible. “But the Trump tariff will cause a gross excess in seaborne steel availability, which is already in excess due to a slowing China. If India does not immediately put similar duties, all the distress cargo will land here.”

  Rising imports have been a major concern for steel producers and are being probed by the Indian government based on an application filed by the Indian Steel Association (ISA) on behalf of its members for a safeguard duty on imports of non-alloy and alloy steel flat products.

  Ritabrata Ghosh, vice-president of Icra, explained that the 25 per cent tariff being imposed by the US removes exceptions and exemptions from the 2018 tariffs on steel, which had excluded certain Asian countries such as Japan and South Korea.

  “Asian countries export about 5.5 million tonnes of steel to the US. A tariff may lead to the diversion of surplus material to India, which is already facing the threat of imports, especially from free trade agreement countries like South Korea and Japan,” he said. According to Icra estimates, domestic hot-rolled coil prices are expected to average 10 per cent lower in 2024-25 compared to 2023-24 (FY24), partly weighed down by elevated cheaper imports.

  As far as the domestic aluminium industry is concerned, Hindalco Industries, Vedanta, and National Aluminium Company (Nalco) are among those with exposure to export markets.

  Brijendra Pratap Singh, chairman and MD of Nalco, believes the US tariffs may impact prices for both alumina (the oxide) and aluminium (the metal). In the earnings call on Tuesday, Singh told analysts that if some of the aluminium does not go to the US, it could be diverted to other markets, increasing aluminium supply and putting pressure on prices. He added that the possibility of smelter shutdowns globally could, in turn, impact alumina prices.

  While aluminium prices elsewhere may come under pressure, those in the US market are bound to rise, as expected by Hindalco’s US subsidiary Novelis. “Let’s say that there is a tariff applied on imports. What happens is that that increase, or rather that tariff, typically gets built into the Midwest premium. And all our contracts are passthrough contracts. So whatever the impact of tariffs on aluminium prices and imports would be offset by the Midwest premium,” said Devinder Ahuja, executive vice-president and chief financial officer of Novelis on an earning calls with analysts on Monday.

 

Ahuja also added that he expects exemptions on the tariffs introduced between the US and Canada, a trade route that Novelis operates in.

  “On the cross-border tariff between Canada and the US, our historical experience is that we get exemptions when we apply,” he said. Novelis supplies the US market through facilities set up in the country, with a major part of its value chain localised.