February 18th 2025.
In recent news, it has been reported that the United States' decision to impose tariffs on the steel sector is not expected to have a significant impact on India. According to Crisil Intelligence, a leading research firm, only 2% of India's total finished steel exports in the first nine months of this fiscal year were to the US. This means that India's steel industry is not heavily reliant on the US market, and the impact of these tariffs is likely to be minimal.
However, the US tariffs are expected to have a three-fold impact. Firstly, it is expected to reduce the exports of countries that trade with the US, as the local production in the US increases. This could potentially affect the global steel market, but India is not expected to be significantly impacted due to its low export volume to the US. Sehul Bhatt, the Director of Research at Crisil Intelligence, stated that India's steel exports to the US only accounted for 2% of the total exports in the first nine months of this fiscal year.
Secondly, there may be a diversion of exporter inventory to other countries at competitive prices. This could lead to a decrease in the prices of steel in India, which are already at a 4-year low. Bhatt mentioned that the Indian government may have to intervene with safeguard duties to support the domestic steel industry. However, the timing and extent of these duties will be crucial in determining their effectiveness.
Finally, the increase in production by US mills may result in a decrease in the availability of steel scrap for exports. This is because a majority of the steel industry in the US uses the electric arc furnace process, which relies on scrap to produce steel. Currently, India sources 14-15% of its scrap requirements from the US. It is important to note that the US imports a significant amount of steel from countries such as Canada, Brazil, Mexico, and South Korea. However, in recent years, there has been an increase in steel exports from countries like Vietnam, Taiwan, and Brazil to the US market.
While the US tariffs may present an opportunity for India's steel exports, there is also a potential risk of surplus steel from countries like Japan and South Korea being diverted to the Indian market. According to a report by ICRA, a rating agency, this could lead to an increase in competition in the Indian steel market. It is clear that the US tariffs have the potential to disrupt the global steel market, and the Indian government will have to closely monitor the situation and take necessary measures to support the domestic steel industry if needed.
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