Cheap Vietnamese steel imports start their ascent in Indian domestic market

New Delhi: Steel imports will continue tormenting domestic manufacturers of the alloy, as Formosa Ha Tinh, the Vietnamese steel producer recently approved by the Bureau of Indian Standards (BIS), starts to ship the commodity to the south Asian nation.

Rising imports from the southeast Asian country are already a cause of concern for Indian steel manufacturers. With this new development, sector experts believe the industry’s margins will come under further pressure.

Recent steel consignment

According to data by BigMint, a hot-rolled coil (HRC) consignment ranging between 35,000 and 40,000 tonnes was booked last week from Vietnam to India at $590-595 per tonne cost and freight (CFR) basis. This cost, according to industry executives, is said to be lower by about ₹2,000-3,000 per tonne than the domestic rates. The inbound consignment is reported to be exclusively from Formosa Ha Tinh Steel Corporation.

Currently, domestic prices for the HRC are in the range of ₹54,000-55,000 per tonne, while the imported product post-Mumbai port charges stand at ₹51,700 per tonne.

As a result, Indian manufacturers have started raising concerns over the increasing imports of cheap steel.

Domestic firms concerned

“It is not so much a (concern in terms of) volume, but it acts as a dampener for pricing," TV Narendran, the managing director of Tata Steel told Mint in an interview last week.

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Cheaper imports tend to put pressure on Indian steel mills to cut their prices to preserve demand for their products. Indian steelmakers allege that in many cases, these imports are shipped at "predatory prices" and amount to "dumping". In other words, they allege that these overseas mills are selling this steel at little profit, or even a loss, motivated by their need to get rid of excess production amidst muted market demand in most major markets.

“If it is unfairly priced imports, we should stop it," Narendran said. "Because at the end of the day, if those steel companies are selling steel in India at prices where they are not making money, why should it derail an industry that is investing tens of thousands of crores in creating new capacity?"

India recorded a surge in steel imports at 8.3 million tonnes in 2023-24, surpassing the country’s exports of 7.5 million tonnes. A tenth of the steel imports came from Vietnam, making it the fourth-largest exporter of the alloy to India, behind South Korea, China, and Japan.

Vietnam comes under India's free trade agreement with ASEAN countries, so tariffs can't be levied to balance the trade. In FY24, Vietnam exported nearly 1 million tonnes of steel to India, rising from a negligible amount before that.

Further, industry experts have continued to observe traction in steel imports after the BIS approval. “Consignments from Vietnam are coming in after a gap of seven months, but more cargo is inbound for July-August, not only from Vietnam but also from China, South Korea, and Japan. So, during the first two quarters (of FY25), imports will continue to rise, further dampening the margins,” Dhruv Goel, the chief executive of market intelligence firm BigMint, said.

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This comes at a time when more than two dozen Vietnamese companies await BIS certification, prompting the Vietnamese trade ministry to urge New Delhi to expedite the BIS certification for its 26 companies, stating that the delays are hurting business. Most of these companies are engaged in the trade of shoes or steel, Mint reported last week.

Imports can decline if...

Thus, market experts believe that it is now on the domestic steel firms to correct their prices and bring them in sync with the global prices so that they can curb the surge in imports of cheap steel.

“The volume of the inbound consignment is likely higher due to imports from both Vietnam and China,” said Zoheir Lokhandwala, director at SSZ Commodities Private Limited. “A clearer picture of the import situation will only emerge by the end of the month, once elections and its related matters have settled, and it becomes clear whether the incumbent government will continue its infrastructure spending.”

If the domestic prices come down and align with the global prices, we might see imports starting to come down from September, BigMint's Goel added.

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