Why Vietnamese steel makes Indian industry uneasy

This has paved the way for the company to resume steel exports to India after the steel ministry mandate for BIS licences late last year hobbled all imports.

“The Vietnamese steel firm getting a BIS licence could potentially further steel dumping into the country," said Ranjan Dhar, director and vice president, sales & marketing, ArcelorMittal Nippon Steel (AM/NS) India, a prominent steel manufacturer with an integrated steel plant at Hazira in Gujarat.

“The apprehension is that other mills from FTA countries and China may also get a renewal of their licences for exporting to India," analysts at market intelligence & consulting firm BigMint said, adding that this was a worrisome factor for Indian mills.

AM/NS’s Dhar added that with India now available as an option, Vietnamese steelmakers will see the country as a lucrative avenue to dump excess production. “This may also affect the significant investments already made by Indian steel producers to increase their steel capacities," he added.

Formosa Ha Tinh and BIS didn’t respond to queries sent by Mint at the time of going to print. 

Also read: Steel industry grapples with price pressures as global demand wanes

Vietnam's steel industry relies heavily on exports, with nearly half of its production being shipped abroad, Dhar said, adding that this is partly because China exports a lot of cheap steel to Vietnam, flooding the local market there and putting pressure on their domestic players to seek alternative global markets.

Government data shows that India’s domestic production of crude steel totalled 143.6 mt in FY24, and consumption was at 136 mt. About 8.3 million tonnes (mt) of finished steel was imported in FY24, a 34% growth compared to 6 mt in FY23. Steel exports during the year came in at 7.5 mt, turning the country into a net importer of steel.

The imports slowed only in the last quarter of fiscal year 2023-24 after the steel ministry issued a quality control order last October that made it mandatory for all steel products imported into the country to have a BIS licence and certification.

“The Indian government had stopped renewing BIS licences in the second half of last year as a non-tariff barrier to reduce ballooning imports, which had hit domestic mills hard," BigMint’s analysts said.

Vietnam is the fourth largest source of steel imports into India behind South Korea, China and Japan. Just under 1 million tonnes of steel was imported from Vietnam into India in FY24, accounting for 10% of the country’s total steel imports, as per data from BigMint.

The country also benefits from India’s free trade agreement (FTA) with the ASEAN block, allowing it to export steel to India without any duties, unlike in the case of China, which pays 7.5-10% import duty depending on the grade of steel.

Also read: Input costs, election, Chinese imports to weigh on steelmakers' Q4 margins

India is one of the only major consumers in the world to have a growing appetite for steel. Amidst muted global demand for the alloy, steel producers have been stuck with excess production, pushing down prices.

While growing steel demand in India has helped Indian steelmakers post a rise in volumes and revenues, their margins have come under pressure due to weak global prices. This is because steel prices in the domestic market are closely linked to global prices. A large deviation in domestic and international prices provides dealers an arbitrage opportunity.

The price of benchmark hot-rolled coils of steel declined from an average of ₹57,900 per tonne in September to ₹52,750 per tonne on average in March, as per data from BigMint.

As the industry advocates for tariffs on the influx of imports, the government maintains its current stance on the issue. And while India's top steel producers have urged the government to safeguard measures, including the imposition of import tariffs, particularly from countries like China, government officials in earlier conversations have told Mint that as per their analysis imports were within their tolerance thresholds.

The government continues to maintain a close watch on import volumes coming into the country, these government officials said earlier.

This comes at a time when the industry is trying to adjust its operations in accordance with the European Union’s Carbon Border Adjustment Mechanism (CBAM), which is further expected to hurt the exports of the country to key destinations in the European continent.

The country though remains is still in the initial stages of exploring various green steel production methods with the ministry setting a target of achieving net-zero emissions by 2070, with a roadmap focusing on the short term (2030).

The stocks of major steel producers in the nation, including Tata Steel, JSW Steel, SAIL, and Jindal Steel and Power Limited (JSPL), have witnessed a significant uptick over the last six months. Tata Steel shares surged 33.02% on the BSE, while JSW Steel experienced an increase of 14.02%. SAIL and JSPL stocks also grew by 86.31% and 51.12%, respectively, on the BSE.