India’s steel imports seen moderating, but ‘net steel importer’ tag a possibility

Steel imports climbed 38.2 percent to 460,000 tonnes in April, according to data from rating company ICRA. (Representative image)

India’s steel imports are expected to moderate in the current financial year but still exceed exports, according to analysts, amid high local demand growth.

The country imported 6.02 million tonnes of finished steel in FY23, a jump of 29 percent from 4.6 million tonnes in the year before that. That was equivalent to about 5 percent of total consumption. CareEdge noted in a March 2023 report that India became a net importer of steel for the first time in three years during October 2022-February 2023.

Although analysts expect a moderation in steel imports, they said the ‘net steel importer’ tag hangs close as a possibility. Steel imports climbed 38.2 percent to 460,000 tonnes in April, according to data from rating company ICRA.

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“Indian steel imports rose by 66 percent year-on-year from September 2022-February 2023 – briefly making India a net importer, much lower than prevailing domestic prices,” said Charvi Trivedi, a senior research analyst at Wood Mackenzie in Mumbai. “However, this was a short-lived phenomenon and imports are beginning to decline. Steelmaking costs are already normalising and improving profitability, led by plummeting coking coal prices.”

Coking coal is an ingredient in manufacturing steel.

Trivedi said steel imports are expected to decline further and stabilise at 4-6 percent of total demand from 7-9 percent recently.

Ritabrata Ghosh, vice president and sector head at ICRA, estimated India's steel imports will grow 5-10 percent and overall demand will increase 7-8 percent.

“Therefore, the market share of domestic producers is unlikely to change much in FY24,” he said, when asked about concerns for local producers.

“I do not expect steel imports to change much year-on-year but we could end up as a net importer of steel this year, but not materially,” said a steel analyst who did not wish to be identified.

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Ghosh agreed, saying, “We may well be a marginal net importer in FY24 as export growth prospects remain challenged by the subdued global economic outlook.”

India’s attractive steel demand coupled with an export duty levied on Indian steel makers from May to November last year also led to exports plummeting. India exported 6.7 million tonnes of finished steel in FY23, lower than 13.9 million tonnes in FY22. This left India as a ‘net steel importer’ for some months of FY23.

CareEdge noted in a March 2023 report that India became a net importer of steel for the first time in three years during October 2022-February 2023.

“Most of these imports came from Japan and South Korea, owing to better cost competitiveness during these months,” Trivedi said. “With sluggish demand in China and Asian countries, steel prices witnessed a steeper decline in these regions, compelling them to ramp up exports. Further, South Korea, Japan and Vietnam enjoy duty-free trade under their free trade agreements with India.”

Japan, South Korea and Russia increased sales to India last year amid healthy growth in demand. India’s finished steel consumption was 122 million tonnes in FY23, higher than 119 million tonnes in FY22, steel ministry data shows.

“Japanese steel is available at a landed price of Rs 58,900-59,000/tonne, much lower than prevailing domestic prices,” analysts with Motilal Oswal wrote in an April 25 note.

Ghosh said imports from South Korea and Japan were largely high-grade steel.

“In addition to commoditised grades from China, we see higher imports from South Korea and Japan, which is largely high-grade steel,” he said. “India is one the major growth centres for demand among the world's largest steel producers and hence attracting imports.”