Challenges facing steel industry: India’s steel producers are grappling with significant challenges as surging steel imports from China disrupt the domestic market. While the country’s steel exports have declined sharply, imports—particularly of flat steel—have risen substantially. This influx of cheaper steel has led to a steep decline in domestic steel prices, eroding profit margins for Indian producers and threatening the viability of large integrated steelmakers who have committed substantial investments over the decade.
Facing dwindling profits and escalating costs, the Indian steel industry is urging the government to implement trade and non-trade remedial measures. Without timely intervention, the sector risks being buffeted by strong headwinds.
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China’s dominance: The root of the crisis
China lies at the heart of India’s steel woes. To maintain its dominance in global steel exports, Beijing has adopted aggressive pricing strategies, selling steel below production costs. Chinese mills, supported by deep financial reserves, have been exporting steel at a loss since 2015, aiming to outcompete rivals and sustain factory operations. This strategy mirrors the disruption caused by Reliance Jio in India’s telecom sector.
Chinese steel is being sold at ₹51,000 per tonne, significantly undercutting domestic producers. China’s annual steel exports, estimated at 120–130 million tonnes, approach India’s entire annual steel production. This pricing war has turned India from a net exporter of steel into a net importer in 2024, with imports rising 25% between April and August. Over 40% of these imports originate from China, which accounted for more than 70% of India’s total steel imports in July.
The repercussions are stark. Domestic steel prices have plummeted to three-year lows, with hot-rolled coil prices falling to ₹51,000 per tonne from a peak of ₹76,000 in 2022. Simultaneously, India’s steel exports have nosedived, hampered by slowing global economies and China’s low-cost competition.
Geopolitical and regulatory challenges
The outlook for Indian steel exports may worsen with impending geopolitical and regulatory changes. Donald Trump’s return to the U.S. presidency in January 2025 is expected to bring harsher tariffs, further restricting market access. Additionally, the European Union’s Carbon Border Adjustment Mechanism (CBAM) will add $100 to $190 per tonne in extra costs for Indian steel, further diminishing competitiveness.
Compounding these issues is the surge in iron ore prices, which have risen 20% even as steel prices dropped by 15% since mid-2023. These economic and regulatory hurdles place the Indian steel industry in uncharted territory.
Green transition — An uphill task for steel industry
India’s ambitious net-zero emissions target by 2070 poses another challenge for the steel sector. Currently, heavily reliant on coal-fired blast furnaces, the industry struggles to align with the nation’s green energy transition. While global peers like China, Japan, and the EU are increasingly adopting electric arc furnaces powered by steel scrap and electricity, Indian steelmakers lag in this shift.
The steel industry accounted for 12% of India’s total emissions in 2022, and the ongoing infrastructure boom is set to push this higher. As the government targets annual crude steel production capacity of 300 million tonnes by 2030—up from 161 million tonnes in 2022–23—the industry faces mounting pressure to reconcile growth with decarbonisation. Industry leaders argue that profitability is essential to fund the investments needed for green technology adoption.
Recent government initiatives include a roadmap for decarbonising the steel sector, focusing on emissions monitoring, green steel production using hydrogen, and piloting carbon capture and storage (CCS) technologies. However, implementing CCS in India is fraught with challenges, including the dispersed nature of emissions in steel production and the lack of suitable geological storage options for captured carbon dioxide.
Opportunities in domestic demand
Despite current challenges, India’s steel sector has significant growth potential. The country’s per capita steel consumption remains low at 86 kg, compared to the global average of 219 kg. As infrastructure projects, the automotive sector, and electronics manufacturing expand, domestic demand is poised to rise.
India is also leading the world in steelmaking capacity expansion, outpacing even China. By addressing emissions from coal-fired blast furnaces, as outlined in the National Steel Policy, and countering China’s predatory pricing, the industry can regain its competitiveness.
The steel industry is counting on the government to scrutinise tariffs, taxes, and regulations to create a more favourable environment. With the right policy adjustments, the sector can overcome its current challenges and achieve sustained growth. By fostering a balance between profitability, environmental sustainability, and domestic demand, India’s steel industry can secure a resilient and prosperous future.