Steel companies in India are grappling with the possibility of production cuts due to rising inventory, weakening demand, increasing production costs, and a surge in cheap imports from China and Korea. These factors are pressuring the domestic steel industry, with demand from key sectors like automobiles and white goods declining.

In the first four months of the fiscal year, finished steel imports into India reached 2.69 million tonnes, while exports stood at 1.57 million tonnes, resulting in a trade deficit of 1.12 million tonnes. In July alone, steel exports dropped by 14% to 0.30 million tonnes, while imports surged by 18% to 0.75 million tonnes.

A steel company official noted that imports continued at a rapid pace due to weak global steel prices. Countries like Japan and Korea are leveraging free trade agreements to increase shipments of semi-finished steel products, further straining India's domestic market. The landed cost of imported steel from China was  Rs 48,358 per tonne in the previous month, compared to domestic prices of  Rs 51,050 per tonne.

Traders have also been caught off guard, as falling prices have eroded profit margins. Steel imports have increased, contributing to a 3% drop in domestic prices last month, with current market prices hovering around Rs 41,700 per tonne.

Despite India’s steel production rising by 6.8% to 12.3 million tonnes in July, the influx of cheap imports has made it difficult for local producers to pass on higher costs. The situation has been worsened by additional levies imposed by mineral-rich states following a Supreme Court ruling.

On the export front, steel companies face further challenges as countries like Malaysia, Turkey, and Vietnam have initiated investigations into Indian steel imports, potentially leading to trade barriers. This will likely slow down Indian exports as buyers become cautious. According to ICRA Research, global steel demand remains weak, keeping competition between Indian and Chinese producers high in key export markets like Europe, West Asia, and Southeast Asia.

(Business Line)