China's steel industry in bad shape, their exports a problem to us: Tata Steel's TV Narendran

Narendran added steel companies in India need to make at least 15-20% EBITDA margin in order to generate enough cashflows to build new capacities, which is a costly proposition.

India should not allow Chinese steel makers to 'export their problems' to us, and the government must 'take some actions', TV Narendran, MD and CEO of Tata Steel - one of the country's largest steel producers - has said, on the influx of cheap steel into the country.

"It is a problem which we had faced in 2015, and the same thing in happening now. The problem is that they (Chinese manufacturers) are selling steel at a price where even they're losing money. This is having an impact on the rest of the industries across the world. Other countries are taking action, India should certainly look at taking some actions," Narendran said in a conversation with CNBC-TV18.

The comments from Tata Steel echo the sentiment of India's steel industry. JSW Group managing director Sajjan Jindal too had said in July that rising Chinese imports were affecting margins of domestic steelmakers. "Several countries have raised barriers against steel imports, and the Indian steel industry is engaged with the government to ensure a level playing field." JSPL chairman Naveen Jindal recently said that a 10-12 percent duty on steel imports will not be enough to fight the ‘predatory’ dumping by China, as quoted by CNBC-TV18.

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Even the Minister of Heavy Industries, HD Kumaraswamy, on September 4 had said that he will push for higher tariffs on Chinese steel import and try to convince the Finance Ministry to raise import duty to over 12 percent from the current 7.5 percent.

China was responsible for approximately 54% of the world's crude steel production in 2023.

Narendran said India has enough iron ore for it not be importing the finished product, even as he acknowledged a section of consuming industries who are seeking cheaper steel. Tata Steel's TV Narendran has called for the need to find a balance when it comes to steel prices, so that manufacturers make reasonable profits to re-invest back into building capacity. "India is blessed with iron ore, why should it be importing steel," he asked, adding it infact India should be exporting steel to other countries instead of importing them.

Narendran added steel companies in India need to make at least 15-20% EBITDA margin in order to generate enough cashflows to build new capacities, which is a costly proposition. For Tata Steel, the margin in Q2FY25 could be lower than what it reported in Q1FY25, weighed down by raw material cost and an influx of cheaper steel from counties like China and Vietnam.

China's steel consumption has been reeling under a prolonged slowdown in the real estate business, and while it has resorted to exporting more of the commodity outside of China, the iron ore market has currently seeing a situation of excess supply, say expert.

In India, the demand remains robust, tracking the GDP trend, but Indian steel makers are not able to export as international steel prices weak, having fallen sharply this year.