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India’s steelmakers are bracing for an increase in Chinese “dumping”. Steelmakers feel Donald Trump’s ascendancy to the White House could lead to a series of retaliatory tariffs on steel and finished steel products. This, in turn, could lead to China diverting exports to other large markets, including India.
The industry feels that they have no “protection” from the Indian government and would hence suffer a “severe impact”.
According to Naveen Jindal, President, Indian Steel Association (ISA), China may reduce its steel exports to the US, “potentially redirecting surplus volumes to other regions, including India.”
“We also expect quicker addition of new capacities in the ASEAN region by Chinese companies to leverage their FTAs and continue exports,” he had previously told businessline.
A day after Donald’s Trump’s victory was announced, sentiments in China’s future markets turned bearish with the January rebar contract on Shanghai Futures Exchange closing 1.11 per cent lower than the day before settlement prices.
“I think there are actions being taken in China and now with the US Presidential election, I think China would be even more concerned about its trade options....,” TV Narendran, MD and CEO, Tata Steel, told businessline recently.
While less than 1 per cent of China’s direct steel exports are shipped to the US, its steelmakers are heavily exposed to potential tariffs on goods such as containers, vehicles, engineering machinery, home appliances and elevators.
So far, global trade data available suggest Chinese exports are over 80 million tonnes (mt) for January-August, up almost 20 per cent year on year.
China is expected to export 220 mt of steel globally this year, including 120 mt of steel and 100-odd mt of finished steel products.
Retaliatory tariffs
According to Ranjan Dhar, Director and Vice-President, ArcelorMittal Nippon Steel India, the retaliatory tariffs imposed by the US in the past have often been followed by similar measures in the European Union and Canada, both of which are significant export markets for China.
If a similar tariff regime is implemented soon — and early signs suggest it might be — Indian steelmakers could face increased Chinese dumping.
“The government must step in with policy interventions to regulate these imports,” he said, adding that the long-term impact of imports could include a slowdown in capital expenditure by domestic steelmakers, who are already under margin pressure due to rising Chinese imports.
“While markets might welcome a fall in steel prices, the long-term repercussions of increased import dependence and reduced capital investment are concerning. If steelmakers don’t generate sufficient margins, why would they reinvest? We cannot sustain a scenario where India exports iron ore but imports steel, as is currently the case,” he told businessline.
Net importer of steel
As per a Steel Ministry report, import of finished steel till October this fiscal was valued at ₹46,884 crore, whereas export was valued at ₹23,238 crore. Thus, overall trade deficit was ₹23,646 crore.
India is already a net importer of steel with imports at 5.8 mt, outpacing exports at 2.8 mt for April-October.
Volume-wise, China was the largest importer to India at 1.8 mt, up 36 per cent year on year, while there has been significant increase in imports from FTA countries like Japan to 1.3 mt, up 128 per cent. Routing of Chinese steel through Vietnam stood at 0.6 mt, up 111 per cent.
As per the ISA, Indian steelmakers lost out market share of 14 per cent in flat steel offerings in Q2 to those coming in from China, Vietnam and other FTA countries (displacement of domestically-manufactured steel). Hot rolled coils and hot rolled plates were among the worst hit with displacements of 17 per cent and 19 per cent respectively.
Stainless steel
The apprehensions percolate to the stainless steel industry too. According to Abhyuday Jindal, MD, Jindal Stainless, Trump is known for a pro-domestic manufacturing stance, prompting China “to escalate its dumping practices in other markets, including India”.
“I strongly urge the Indian government to create a level-playing field for domestic manufacturers in the stainless steel industry,” he added.
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