US metal tariffs may hit Indian steel firms, but Hindalco-backed Novelis could be a key beneficiary

Excess steel capacity in China and South Korea may hit Indian markets, further dampening prices, according to analysts

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26 Aug, 2025 12:21

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The United States' action to impose a 25 percent tariff on all steel and aluminium imports can impact Indian steel and metal manufacturers as well, even though India is not a large exporter of primary metals to the US, analysts said.

Indian manufacturers will feel the impact if excess global capacity from countries such as China and South Korea is redirected towards markets such as India, which may further weaken the pricing power of Indian steel mills, they added.

"The US tariffs on steel will increase competition and exacerbate oversupply at other steel producing markets. Indian steel producers will face increased challenges in exporting their products. Over the past 12 months, high steel imports into India have already dampened prices and earnings of steel producers in India," said Hui Ting Sim, assistant vice president at Moody's Ratings.

Hindalco, JSW to gain

However, Indian companies with manufacturing operations in the US stand to gain from the trade actions, particularly aluminium major Hindalco Industries' Novelis subsidiary.

Novelis, which has a large facility in Bay Minette, Alabama, is a market leader in providing packaging material for beverages and a key supplier to automobile and aerospace manufacturers in North and South America. JSW Steel, which has a steel manufacturing capacity of 1.5 million tonne per annum (MTPA) in Texas and Ohio, may also stand to gain from higher tariffs on imports, according to analysts.

"We may see an increase in Mid-West premium, as aluminium gets more expensive in the US. The higher mid-western premium would benefit Novelis in the form of higher recycling margins. While there can be some demand destruction in the US, no impact is seen on Novelis shipments for can sheet, autobody sheet and specialties," said Satyadeep Jain, lead metals analyst for Ambit Capital. In industry parlance, "Mid-West premium" in aluminium is defined as the regional price of the metal in the mid-western US.

Aditya Birla Group-backed Hindalco has become hugely dependent on its Novelis operations in its balance sheet, with Novelis contributing more than 60 percent on the topline for Hindalco in the quarter ended September 30, 2024.

Indirect impact

Overall, the actual impact of the tariff may be mostly felt by European steelmakers, which depend on the North American market to tide over a demand slowdown and supply glut in Europe, especially in the European Union.

"EU steel exporters which focus on the US market will be hurt the most. India can potentially export about 10 million tonne to the US of special grade steel, stainless steel and some grades of flat steel... In 2024, 300,000 tonne of Indian steel exported to the US was allowed waiver from any tariffs. Tariff reimposition will indeed affect direct Indian exports to this quantum. However, the general glut of steel in Europe will impact Indian exports indirectly. Our primary aluminium exports to Mexico, the Netherlands and other European nations total about 600,000 tonne per annum and this may come under stress," said Niladri B, partner and metals and mining industry leader at Grant Thornton Bharat.

According to industry sources, Indian manufacturers exported around 9 million tonne of steel to the US in 2023. Data from the United Nations COMTRADE database showed that most iron and steel exports to the US in 2023, valued at around $504 million, were in the form of pig iron and stainless steel products.

Jindal Stainless may be hit

An analyst speaking on condition of anonymity, however, noted that elevated levels of stainless steel exports to the US may affect companies such as Jindal Stainless. The company has partnered with US consumer goods giant Procter & Gamble to supply highly specialised stainless steel products used in the company's Gillette brand of razors in the US.

According to a report from Reuters, the company had increased its supplies from Jindal Stainless in anticipation of Trump's tariff actions on overseas steel, quoting P&G's filings with the US Department of Commerce. The company had excess costs of more than $1 billion due to tariffs during Trump's earlier presidential term, it told investors.