Despite import drop amid safeguard duty support, steel prices lower than last year

Global oversupply trends, slackening in demand, and low input prices kept steel prices lower despite duties

Prices of various grades of steel in April-July this year were below levels in the same period last year, market data showed, even as the industry has gained some form of control over pricing after the government's 12 percent safeguard duty on a number of steel imports. While the move contributed to some improvement, this was offset by relative sluggishness in demand, which meant that prices did not move up to the extent anticipated, according to market sources.

According to data shared with Moneycontrol by metals market analytics firm BigMint, the price of hot-rolled coil (HRC) steel, which has extensive applications from automobiles to energy, was at an average of Rs 51,129 per tonne in the April to July period this year, 4 percent lower than in the same period last year. While largely flat in April year-on-year, prices fell in June and July, by around 5 percent each over the same month a year earlier. In May, prices of HRC dropped by 4 percent year-on-year, according to the data.

According to metal dealers, construction activity in some segments were affected due to the slightly early onset of the monsoon in some parts of India, while uncertain and sluggish demand for cars also kept ordering in check. According to data from the Society of Indian Automobile Manufacturers (SIAM), sales of passenger vehicles declined by 1.4 percent year-on-year for the April-June quarter alone. Passenger vehicle sales were flat year-on-year in July, industry data showed.

Analysts said that persistent global oversupply, as well as pricing sentiments globally, are keeping Indian steel prices depressed. Low input prices, especially those of coking coal, are also contributing to continued sluggishness in prices, they added. High prices of coking coal and other key inputs had earlier enabled steelmakers to carry out price hikes, in order to pass on costs and incrementally increase margins.

"Persistent global oversupply mainly from China and weak raw material costs have kept Indian HRC (hot-rolled coil) prices depressed year-on-year, even after safeguard duties. While these duties have curbed steel imports and offered some support, they have not been enough to offset the impact of international price pressures and global supply-demand imbalance, thus keeping domestic prices under pressure," said Hemant Dewangan, assistant general manager, steel, BigMint.

The continued sluggishness in prices is despite steel imports declining by 8 percent year-on-year in the April-July period to 3.15 million tonnes, according to a recent BigMint report. Industry figures said that the decline is largely due to the safeguard duty imposed by the government in April.

Chinese imports, long blamed by Indian steelmakers due to its deflationary impact on prices, declined by 41 percent to 660,000 tonnes, while imports from South Korea were flat at 830,000 tonnes. Prior to the decline in imports, China was the largest source of steel imports. Japanese imports also declined by 52 percent during the period, with the landed cost of Chinese or Japanese HRC steel being at a premium compared to a similar product from an Indian steel mill.

Imports from Vietnam, however, rose significantly to 450,000 tonnes, which analysts attributed to loading of orders ahead of the government's imposition of an anti-dumping duty on most Vietnamese steel mills. The Directorate General of Trade Remedies has recommended a duty of $121.50 per tonne on imports from Vietnam of alloy and non-alloy flat products for a five-year period. Some stainless steel products have been excluded from the scope of the duty.

India has continued to wean itself off Vietnamese steel imports after peaking at nearly 1 million tonnes in 2023. For 2024, Vietnamese mills sent around 593,000 tonnes of steel products to India, 40 percent lower than in 2023.