Synopsis
- India’s direct steel exports to the US are relatively low, constituting around 4% of its total exports in CY24. As a result, the direct impact on the steel sector’s sales volume due to the imposition of tariffs by the US is not expected to be significant. However, there is likely to be an indirect effect on realisations if major steel exporters to the US divert some of their supplies to India.
- Global steel consumption is expected to decline for the second consecutive year in CY24, mainly due to a decline in consumption from major developed countries, including the USA, Japan and the European region.
- China, which accounts for nearly half of global steel production and demand, also experienced a continued decline in domestic consumption. However, the capacity utilisation rate of the Chinese steel industry remains above 80-85%. This, combined with declining domestic demand, has led to significant surplus production being exported, estimated at around 90-95 million tonnes (MnT) during CY24, an increase from approximately 65 MnT previously CY22.
- India continues to witness good demand for steel, growing at around 10-13% during the last three fiscal years (FY22 to FY24).
- Weakening demand in major steel-consuming economies has led to an over-supply situation, thereby adding pressure on realisations. Global steel prices (world export prices for Hot Rolled Coil) have averaged around US$ 535 per tonne during CY24, down from around US$ 788 per tonne recorded in CY22. Global steel prices declined in CY25, hovering around US$ 481 per tonne in January 2025.
- An increase in import tariff by the US could result in the diversion of surplus production by major Asian steel manufacturing countries to Indian markets, which is likely to keep realisations under check. During 10MFY25, realisations of the domestic steel industry have already witnessed moderation with growing imports of steel whereby India has turned a net importer vis-à-vis a net exporter up to FY24 – even though the overall volume of steel import into India is low compared to total domestic consumption, the realisations tend to mirror the landed cost parity with international prices.
- India is a major exporter of primary aluminium (around 40% of our domestic aluminium production is exported during CY24). India’s direct aluminium exports to the US are around 6-8%. Consequently, the impact of the tariff hike on export volumes and its realisations for Indian aluminium producers is expected to be higher than that of domestic steel manufacturers. However, India remains one of the lowest-cost aluminium producers globally, mainly on account of the availability of quality bauxite reserves, which improves India’s cost competitiveness in the global market – this can provide greater cushion to domestic aluminium producers to meet the increased competition from any over-supply scenario arising from the imposition of tariff by the US.