Domestic steel makers are facing a double whammy of weak local demand coupled with a slowdown in Chinese real estate putting pressure on exports.
Besides these, sustained Chinese steel output is also eating into India’s share of metal exports to Vietnam and the United Arab Emirates (UAE). These are the two most prominent destinations for Indian steel products after the European Union.
India exported steel worth INR 98117 crore in fiscal 2023-24, down from INR 1,06,919 crore in FY23. Of this, INR 5,367 crore exports went to the UAE in FY24, down from INR 8400 crore in FY23.
In terms of volume, total steel export from India in FY23 stood at 6.7 million tonne (mt) of which 0.70 mt was exported to UAE. In FY24, India’s total steel export was 7.5 mt of which 0.52 mt was exported to UAE.
“India’s share of steel exports to the UAE has declined to 6.9% in FY24 from 10.4% in FY23,” said Sumit Jhunjhunwala, Assistant Vice President & Sector Head-Corporate Ratings, ICRA Limited.
According to Jhunjhunwala, China’s real estate sector has yet to recover, and property prices show a downward trend. “China with its humungous steel capacity needs a market for the metal and if not domestic market, China is dumping it in foreign markets, perhaps even below the production cost,” he said.
Further, Vietnam which once was a net importer of Indian steel has become a net exporter.
Steel prices in the domestic market have also been reeling under pressure due to low import prices, creating space for Chinese imports.
“Chinese Hot rolled Coil (HRC) is reaching India at INR 53,000 per tonne in May 2024, while prices in India were around INR 53,900 per tonne. And since domestic steel prices are trading at a premium of INR 800-900/tonne over the landed cost of imported HRC offers from China, the domestic steel imports are likely to rise further by 13-14% in FY2025 ,” said Jhunjhunwala.
But India is the fastest-growing market for steel consumption and with the elections ending, there may be increased expenditure on infrastructure, further fuelling steel intake in the country. This creates space for Chinese steel imports in the Indian market.
“As long as appetite for steel keeps growing in the Indian market, India would allow Chinese imports,” said Amit Bhargava, Partner and National Head Mining & Metals, KPMG in India.
“But India will mind the imports if domestic steel prices fall substantially, affecting the profit margins of manufacturers as input costs for raw materials such as coking coal and iron ore come into play,” added Bhargava.
India became a net importer of steel in the previous financial year from a net exporter in FY23 even though its exports increased by 12% in FY24.
