India’s steel ministry proposes 25% safeguard duty on imports

India's steel ministry has proposed a 25% safeguard duty on certain steel imports to address the concerns of the domestic steel manufacturers, according to the ministry.

The proposal came at a meeting between union minister of Steel, H D Kumaraswamy, and Commerce and Industry minister, Piyush Goyal, Dec. 2, amid concerns about large influx of steel imports into the country, particularly from Free Trade Agreement countries.

"With both industries playing a vital role in India's development journey, discussed ways to boost production, enhance quality, and further strengthen global competitiveness," Goyal said in a post on X, formerly known as Twitter.

According to Kumaraswamy, the two ministries discussed ways to collaborate and ensure ease of doing business for domestic players.

"We discussed ways for our ministries to collaborate and ensure ease of business for the steel and heavy industries, key sectors driving India's growth," Kumaraswamy wrote on X.

India has set a target of 300 million mt of steel production capacity per year by 2030.

Domestic steel players have been consistently raising their concerns over rising cheap steel imports from select nations, affecting their competitiveness, amid weak demand.

Indian steel prices have been under pressure, with Platts assessing Indian domestic HRC prices at their lowest level in over two months, at Rupees 47,500/mt ($562.23/mt) ex-works Mumbai Dec. 3, down 13.6 % from the high in 2024.

Market holds mixed views

"For the time being, people will start speculating about the market, and it might boost the overall market sentiment. However, it won't make any difference until it is accepted by the finance minister," a Mumbai-based trader said, adding that they need to keep a close watch on its impact.

Most likely, traders might attempt to push prices higher, but currently, the market is too weak to absorb any price increase, the trader added.

"The consumer sector will also pressure the government not to levy such a large import duty, as it would give domestic mills a free hand. At the same time, if raw steel becomes expensive, it makes exporting the final product difficult," another Mumbai-based trader said.

So far, the proposal has not had an immediate impact on the steel market, and it is unlikely to stimulate market activity, which has been subdued for an extended period since post-Diwali, according to market participants.

Meanwhile, coking coal traders were elated about the proposal, citing possible increase in inbound flows of the raw material for the mainly blast furnace-based steelmaking nation.

"Its good news isn't it; they will then need more coal and coke for feed. Moreover, it could also benefit the coking coke producers in Indonesia, where they need to find more buyers while increasing their production," a coal trader said.

However, some market participants noted that a 25% safeguard duty can be impractical to implement. They also emphasized that there has been pressure on the government from the mills' lobby for a long time, and the proposal might be a way to keep them calm and satisfied.

Domestic mills announced a price hike in mid-November amid the absence of imports from China and Vietnam, following the expiry of Bureau of Indian Standards certification. However, due to sluggish market activity and high inventories of imported materials, prices failed to sustain the elevated levels and gradually declined.

"I think the proposal aims to discourage imports, especially from Japan and South Korea. Also, I don't believe the finance ministry will accept this unviable proposal. As for market and prices, only a boost in demand can push the prices up. The last quarter is generally good for the market, and we are hoping it doesn't disappoint us," a third Mumbai-based trader said.

In November, Sandeep Poundrik, Secretary, Ministry of Steel, while acknowledging that there is a genuine problem of supply glut due to increased imports said that "around 62% of steel imports are landing from FTA countries at nil duty and any duty hike will not have any impact on these shipments."

According to Joint Plant Committee Dec. 3, import volumes of finished steel in India between April-August was 3.72 million mt, up 33.8% on the year.