India’s steel industry, a cornerstone of its industrial economy, is navigating a complex landscape of global challenges and domestic pressures, necessitating decisive strategic interventions. Between April and October 2024, the nation’s finished steel imports surged to a seven-year high of 5.7 million metric tonnes, fuelled predominantly by the influx of low-cost steel exports from China. Simultaneously, India’s steel exports plummeted to a seven-year low of 2.8 million metric tonnes, revealing competitive challenges in global markets.
Despite these headwinds, the domestic steel sector exhibited resilience. Finished steel production rose by 4.4% year-on-year to 82.7 million metric tonnes during April-September 2024. This uptick was matched by a robust 13.5% growth in domestic consumption, which climbed to 72.7 million metric tonnes, underscoring strong demand within the country.
Industry leaders sound the alarm
Prominent industry figures have expressed concern over the rising influx of inexpensive Chinese steel. Sajjan Jindal, Chairman of JSW Group, has termed this trend a significant threat to the viability of domestic steelmakers. Similarly, T. V. Narendran, CEO of Tata Steel, warned that unchecked imports of “unfairly priced” steel could undermine domestic investments and jeopardise the sector’s growth. Both leaders have called for swift governmental intervention to safeguard the industry.
Proposed government interventions
In response to industry concerns, the Ministry of Steel has proposed several measures, including the imposition of a 25% safeguard duty on specific steel imports. Additionally, in a progressive move towards sustainability, the government has introduced a “green steel” taxonomy to encourage decarbonisation and align the sector with global environmental goals.
This data highlights the widening disparity between imports and exports, amplifying the need for targeted policy measures to bolster the sector’s competitiveness.
Raw material pricing: A critical challenge
The dynamics of raw material pricing, both domestic and imported, have emerged as pivotal factors influencing India’s steel industry. Price disparities have exacerbated the challenges posed by rising imports and declining exports.
Imported raw materials: Indian steelmakers rely heavily on imported coking coal, a critical input for steel production. Volatility in global coking coal markets, driven by geopolitical tensions and supply chain disruptions, has escalated input costs, eroding profitability for domestic producers.
Domestic raw materials: While India has abundant iron ore reserves, fluctuating domestic prices—resulting from policy changes, royalty adjustments, and supply-demand imbalances—have compounded the challenges for steelmakers. These higher costs further diminish their global competitiveness.
China’s cost advantage: Chinese steelmakers benefit from lower raw material costs, leveraging domestic iron ore and subsidised coking coal to produce cheaper steel. This cost efficiency enables China to flood global markets with competitively priced steel, posing significant challenges to Indian exporters.
Implications of pricing disparities on trade dynamics
The dual burden of elevated domestic raw material costs and expensive imports has rendered Indian steel less competitive on the global stage. This imbalance has led to:
Rising imports: Cheaper finished steel from China and other nations increasingly penetrates the Indian market, undercutting domestic players.
Declining exports: Indian steel struggles to maintain a foothold in price-sensitive international markets, resulting in a notable contraction in export volumes.
Governmental measures to address pricing challenges
To mitigate the impact of raw material costs and restore equilibrium in the steel industry, the Indian government is exploring several initiatives:
Coking coal strategy: Scaling domestic coal production and securing long-term import agreements to stabilise prices.
Iron ore pricing reforms: Developing sustainable pricing frameworks to ensure affordability for domestic steelmakers.
Green steel promotion: Encouraging hydrogen-based steel production methods to reduce dependency on coking coal and align with global sustainability standards.
Future outlook
India’s steel industry finds itself at a critical juncture. While strong domestic demand underscores the sector’s growth potential, the twin challenges of rising imports and shrinking exports require urgent policy interventions. The government’s proposed safeguard duties and green steel initiatives are steps in the right direction, but long-term success will hinge on addressing raw material price disparities and fostering an environment conducive to investment and innovation.
As the global steel landscape evolves, India has the opportunity to position itself not only as a robust domestic producer but also as a leader in sustainable steelmaking practices. Strategic foresight and timely action will be key to ensuring the sector’s resilience and global competitiveness.