Steel imports trip on India’s bureaucratic red tape

Mumbai: Steel imports into India, which had surged to multi-year highs in recent months, are suddenly tripping as two key exporting countries, China and Vietnam, find themselves stuck in Indian red tape, said people aware of the matter.

This is expected to bring relief to major Indian steelmakers as the rising imports were eating into their margins, after domestic prices of the alloy fell to multi-year lows due to competition from cheap imports.

There are no active offers from Chinese steelmakers in the Indian market, according to Dhruv Goel, chief executive of BigMint, a market intelligence firm, as hardly any of them have valid Bureau of Indian Standards (BIS) certificates.

Also read |  Govt panel may approve ₹4,000 cr new PLI scheme for specialty steel next month

An order from the steel ministry last October made it mandatory for steel imports to seek the government's nod to import steel products not compliant with BIS (Bureau of Indian Standards) standards in view of rising inbound trade of substandard products.

Few Chinese producers have BIS certificates, plus some of them are about to expire. The BIS licence of Bengang Steel Plates Co. Ltd., one of the largest exporters of steel to India, will expire on 2 November, as per BIS data. The licence of another Chinese steelmaker, Baosteel Zhanjiang Iron & Steel Co, is set to expire on 28 January 2025.

Apart from these two, only Jiangyin Xing Cheng Special Steel Works has a valid BIS certificate, which is set to expire in October 2026. However, the specialty steelmaker has negligible trade with India. No other Chinese factory has an operational BIS certificate.

Almost the same story

The story is much the same for Vietnamese companies, too, plus there is the added spectre of a probe that India has launched against them for dumping. “There has been no order booking from Vietnam since the investigation started," said Goel.

Indian steel traders stopped buying from Vietnamese steel companies after New Delhi launched the probe in August into imports of hot-rolled flat steel (HRC) products from the country, trade sources said. This is because they fear they may be liable to pay duty retrospectively if the investigation finds Vietnamese steelmakers guilty of dumping.

Also read |  China’s real estate package stimulates Indian steel

Chinese mills amped up exports to India in 2024 as demand in their domestic market and other international markets fell due to an economic downturn. India remained the only major market where steel demand was on the rise.

As for Vietnam, Formosa Ha Tinh, a leading Vietnamese steel producer, got BIS approval this May. Subsequently, a lobby of domestic steelmakers called Indian Steel Association pushed the government for an anti-dumping investigation after imports from the country surged.

An email sent to BIS on Monday seeking comment remained unanswered as of press time.

The background

India’s steel imports grew 32% between April and August this year compared to the same period last year, as per government data released by the Joint Plant Committee. In FY24, the imports had grown 38% over the previous year.

To be sure, this led to a sharp drop in domestic steel prices. In September, steel prices dropped below the ₹50,000 mark for a tonne for the first time since November 2020, as per data from BigMint.

Also read |  India plans ‘safeguard duty’ to protect steel companies from cheap imports

Companies have been feeling the pinch from this price fall, with their margins eroding.

So far, amongst major steelmakers, JSW Steel has disclosed its earnings for the July-September quarter. The company reported a 4-percentage point year-on-year drop in its Ebitda margin to 13.7%. Other major steelmakers are expected to report similar margin drops on account of lower realizations due to competition from cheap imports, analysts have noted.

Domestic prices to rise going forward

Shipments from China usually take two months to arrive after order placement. There could be many shipments in transit at the moment, as per trade analysts. They expect steel imports to sharply taper from December.

Also read |  India gears up for national green steel mission as demand surges

“The reduction in HRC imports from China to India is anticipated to begin impacting the market within the next one to two months, as many Chinese mills currently lack valid BIS licences or have licences set to expire soon," as per analysts at BigMint.

The drop in imports could start putting an upward pressure on domestic steel prices by December or January, the analysts said.

Indian steel firms cheer

“It will be a positive for India," Jayant Acharya, joint managing director of JSW Steel told Mint during a recent post-earnings interview. The company is closely tracking the situation, he said.

“I think it's important for the government to also understand that at this point of time more and more countries are putting in trade barriers to shield themselves from this kind of Chinese barrage of imports, which are coming in at low prices," he said.

Also read |  Metal companies' September quarter could be a mixed bag

As per a report from S&P dated 24 July, India’s steel imports hit a seven-year high in July due to a surge in shipments from China. During January-July 2024, China displaced South Korea as the leading seller of steel to India, comprising 43% of India's total steel imports during this period. South Korea accounted for 31% of imports.