Fortune 500 India: Indian steelmakers struggle as cheap imports surge

IN 2015, an investigation by the Directorate General of Safeguards, later renamed as DG Anti-Profiteering, found that the increased imports of certain kinds of steel had “caused serious injury” to domestic producers. China, Korea, Japan and Russia were dumping steel products, including hot-rolled steel and other variants, which shaved off a major portion of profits from the books of domestic steelmakers. Finally, the government had to step in to ensure a level-playing field, and impose a 20% levy on import of certain categories of steel.

Cut to 2024, and it’s a deja vu of 2015 for Indian steel companies. Steel imports in the first half of FY25 increased 41% to 4.7 million tonnes (MT), against a year ago, while exports slumped 35.9% to 2.3 MT, as steelmakers in China slashed output and cleared inventory by exporting at discounted prices to avert bankruptcies, amidst the country’s protracted property crisis. The result: According to industry estimates, domestic producers are sitting on steel inventory worth ₹90,000 crore.

India Inc. has been quick to voice its concerns. T.V. Narendran, MD and CEO, Tata Steel recently asked the government to take action to stop Chinese dumping in India. Sajjan Jindal, chairman, JSW Steel, has pointed out that several countries have already raised barriers against steel imports to ensure a level-playing field for the domestic industry. Naveen Jindal, chairman, JSPL, meanwhile, has suggested an increase in import duty, adding that a 10-12% levy is not enough to counter dumping.

Amidst all such worries, the government has set an ambitious target of 300 MT of crude steel production by 2030 and 500 MT by 2047. In FY24, domestic finished steel consumption soared over 14% to 136 MT, thanks to booming construction and infrastructure sectors, which consumed 94 MT of steel. The country’s per capita steel consumption is currently around 100 kg, much lower than the global average of 230 kg. According to Deloitte India, the finished steel consumption is expected to hit 221-275 MT by FY34, driven by construction, infrastructure, and automobile sectors.

The advantage for the sector is that the government has budgeted a record ₹11.11 lakh crore for infrastructure in FY25 to support growth and create jobs. The Centre expects steel demand to increase 8% in 2024 and 2025.

However, the 41% spike in steel imports in the first half of FY25 sent alloy prices crashing, setting off alarm bells for domestic manufacturers who have been adding capacities, expecting a surge in demand.

Trouble In Waiting

The influx of cheaper imported steel has put corporate India’s financial performance under pressure. JSW Steel’s net profit declined 84% year-on-year to ₹439 crore in Q2 FY25, while revenue from operations fell 11% to ₹39,684 crore. Its competitor Tata Steel, meanwhile, reported a 3% YoY decline in revenue from operations to ₹53,905 crore. The slip has been attributed to weak domestic prices and muted demand, compounded by competition from imports.

The steel industry plays a critical role in infrastructure development, economic growth, and employment. Despite its strategic importance, steelmakers face a challenging landscape marked by multiple pressures, one of them being the rising cost of essential raw materials such as iron ore and coking coal. Though the country is rich in iron ore reserves, global price volatility and competition for high-grade ore have made raw material costs unpredictable. Coking coal, a key input, is largely imported from Australia and Indonesia, which are affected by supply disruptions.

Indian steelmakers also face fierce competition from global players, particularly from China, South Korea and Japan, which often offer favourable production costs. With surplus production, these countries export steel at lower prices, leading to dumping worries in India. While the government has imposed anti-dumping duties and other trade measures, they are often insufficient to shield the domestic industry from foreign competition.

Historically, steel producers rely on heavy borrowing for operational needs, and hence find it tough to avert loan defaults. Over the last decade, many domestic companies, including the likes of Essar Steel, Bhushan Steel and Monnet Ispat, have faced insolvency proceedings, restructuring, and even acquisition by foreign companies to resolve their debt burdens. The high level of indebtedness also limits companies’ ability to invest in innovation or capacity expansion, placing them at a disadvantage compared to global peers.

Safeguard Measures

In response to these challenges, the government is considering a temporary safeguard duty on steel imports to protect domestic manufacturers. The measure aims to curb the influx of cheap imports, particularly from China. The steel ministry has also recommended doubling of the basic customs duty on the import of the metal, raising it to 15%, similar to the European Union and the U.S.