India’s steel mills wary of Chinese import surge

India’s steel-makers have raised concerns over increasing shipments of the metal from China and “other ASEAN” nations. The increased imports have skewed up the domestic market with some of the larger players pointing it out as a “risk.”

JSW Steel, the largest steel player in the country; state-owned SAIL and Naveen Jindal promoted JSPL are some of the larger integrated steel-makers who have raised the issue of rising Chinese imports during their earnings call.

India steel imports at 2.61 million tonnes (mt) grew 30 per cent y-o-y in Q4 (Jan - Mar) and at over 8 mt for the full year grew by 38 per cent. Last fiscal, one out of every three product imported was Chinese.

In April, nearly 0.14 mt of steel came in from China, up 29 per cent y-o-y, but Japan and Korea were the top two importers at 0.21 mt and 0.15 mt, respectively.

• Also read: Global steel production drops 5% in April 

Key risk

According to Jayant Acharya, Joint MD and CEO, JSW Steel, rising steel imports remain a key risk for the domestic steel industry, especially from China and the ASEAN. During the earnings call, the Joint MD said, domestic sales for the company stood at 5.16 mt and fell marginally “due to elevated imports and channel destocking pre-elections”.

“........ more than 95 per cent of the steel, which is imported or maybe 96 – 97 per cent is produced in India fully capable by all the domestic mills or most of the domestic mills. So therefore, availability in India for those is not a constraint,” he said, adding that there may be some special grades where the minimum order quantity is too small to be commercially viable, then there could be some import of that item; or where a unit buys from its overseas entity.

“....otherwise I don’t see any need for import or for somebody to rely on the import. I think most of the import is primarily due to an opportunity of a price arbitrage, which takes place,” Acharya added that : “Imports from China is a concern and we will have to continue to watch that in this year as well.”

• Also read: India pushes steel industry for greater carbon transparency as CBAM reality dawns

Price guidance

Domestic steel demand continues to be strong though. A conservative growth trajectory for India for this decade, between 7 and 10 per cent, we see an incremental demand of 12 mt per year.

“We have seen an increase in global steel prices rising by around $20/tonne in China and some of that has been reflected in April and May in India as well,” he said.

Acharya said, domestic prices have bottomed out and the company was expecting to see a better pricing environment or more stable pricing in the coming days. “However, the prices even after the increase, is probably where we were 6 months back,” he said.

• Also read: Steel production drops amidst elections, exports continue to fall

SAIL

Similar concerns have been raised by SAIL.

According to Praveen Nigam, ED (Finance and Accounts), SAIL, demand improvement has not been significant in China. Now the US has increasing tariffs on select items including steel (coming in from China). And this could lead to “increased flow (of the metal) coming into India.” “There is every likelihood that such (Chinese steel) will put pressure on domestic prices,” he said duirng the company’s earnings call.

JSPL top brass during their earnings call said, “price hikes (in steel) would be guided by how the market behaves and how Chinese prices are moving up and down.”