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If the Indian government imposes safeguard duties on steel imports it will have a limited impact on the domestic steel Industry, says a report by HDFC Securities.
The report mentioned that a large portion of steel imports--around 62 per cent--comes from countries with which India has Free Trade Agreements (FTAs) so imports from these countries will have limited impact because of the FTAs. It said, "the levy of duty would have limited impact as majority of steel (around 62 per cent) is imported from FTA countries at nil duty and any duty hike will not have any impact on these shipments". The report highlighted that the majority of the steel imports to India come from countries like Japan, South Korea, Mauritius, and the ASEAN bloc which export steel to India at zero duty. However, the report stated that safeguard duty will play a crucial role in curbing steel imports from China, which is currently dumping steel into global markets at lower prices due to weak domestic demand. With domestic producers struggling, the Indian government is considering to impose safeguard duty as a measure to protect the local industry. If imposed, it will increase the cost of imported steel in the domestic market, making Indian-made steel more competitive. Additionally, the move is expected to reduce overall steel imports, particularly from China, which does not benefit from FTA exemptions In short, the report states that the safeguard duty will majorly impact steel imports from China only. The inflow of cheap Chinese steel has severely affected Indian steel manufacturers, reducing their sales volumes and profit margins. However, industry experts believe that while the duty may provide some short-term relief, it will not completely solve the issue. From 1mn MT crude steel capacity at the time of independence in 1947, India has risen to become the second-largest producer with 180mn MT capacity by FY24-end. India's per capita steel consumption in 2023 stands at approx. 93kg, significantly below the global average of 220kg, highlighting substantial room for growth and opportunities as the country progresses towards increasing urbanisation and industrialisation. The report also highlighted that the rural per capita steel consumption, which is around 22 kg in 2023, remains below the national average, creating a drag on the overall growth rate. However, with the government prioritizing rural development and increasing investments in rural infrastructure, we anticipate a gradual convergence of rural steel consumption with the national average, driving incremental demand in the sector. National Steel Policy targets to increase India's per capita steel consumption to 158kg by FY31. (ANI)
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