India becomes No-2 in steel, high US tariff a concern

In a major achievement, India has overtaken Japan to become the world’s second largest producer of crude steel in February.  India’s crude steel production was up 4.4% and stood at 93.11 million tonne (mt) for the period April 2017 to February 2018, compared with April 2016 to February 2017, which has helped India to overtake Japan and become the second largest producer of crude steel in the world. According to the World Steel Association, India produced 8.4 mt of crude steel in February 2018, up 3.4% over February 2017. Overall, the Indian steel industry has been on an upswing, with increased demand fuelling high prices. Operational capacity has also remained steady. The S&P BSE Metal index is up 22.7% from the year-ago period.  

However, the United States’ proposal to impose steep tariffs on finished steel imports could upset the applecart, even though India accounts for only 2.4% of total imports to the U.S. The corresponding value for aluminium is 2%. In terms of scale, the U.S. is a relatively small market for Indian steel exports, but the erection of trade barriers by the Trump administration can indirectly affect steel prices worldwide, including in India. 

According to a Joint Plant Committee (JPC) report, the total production of finished steel products stood at 88.59 million tonne (MT) for the period from April 2017 to January 2018. This represents an increase of 5.3% over the corresponding period last year. 

The report published by the monitoring agency affiliated to the Ministry of Steel also reveals the industry’s growing export capability. 

For the duration of the survey, India’s exports increased 40.2% over the year-ago period. This highlights the increasing importance of exports to steel manufacturers in the country. While tariffs could make Indian steel less attractive to American buyers, it could lead to a glut in production, and a corresponding depression in prices. Even the Export Import Data Bank maintained by the US Department of Commerce reveals that in 2016-17, India traded iron and steel worth Rs.2,211 crore with the U.S. This represents only 0.78% of the aggregate trade between the two countries. India has a trade surplus of Rs 133,352.61 Crore with the U.S., its second largest trade partner after China. However, the relatively small share of steel in the overall trade mix could have a bigger impact since it is a feeder for other industries.

At the present levels of production, any barrier to global trade can disrupt the steel industry, leading to a fall in global prices. This could consequently lead to a deluge of cheap imports into the Indian market, dampening the mood of domestic producers. The S&P BSE Metal index fell by 5% after Trump announced his intention to slap tariffs on steel and aluminium imports. 

Anti-dumping measures can safeguard the interests of the Indian steel and aluminium manufacturers in the domestic market, but the imposition of steep tariffs could take the sheen out of Indian steel in the global marketplace.