India's steel prices plunge to four-year low, most affordable since covid-19

According to data from market intelligence firm BigMint, prices of benchmark hot-rolled coils (HRC) of steel averaged ₹48,350 per tonne in September (from ₹57,900 in September 2023), falling below the ₹50,000-mark for the first time since November 2020, when sales hit rock bottom in the thick of the pandemic.

Prices went as low as ₹47,100 in the past week. “While prices have shown some stabilization this week, they have consistently declined, reaching over a three-year low," analysts at BigMint said in an emailed response to Mint’s queries.

According to industry experts, steel imported from China has been available at a 5-10% discount to domestic prices even after levying basic customs duty and logistics charges. This is forcing Indian steelmakers to lower their prices at the risk of eroding their margins.

“You will see the upcoming results; all the margins will be squeezed," a top executive at one of India’s largest steel companies said on condition of anonymity.

Why are steel prices falling?

The price fall has been an outcome of a lull in domestic demand coupled with an increase in lower-price steel imports, experts said.

India's steel imports in the first half of FY25 are estimated to be about 5.1 million tonnes, according to BigMint data, a staggering 54% year-on-year (y-o-y) rise from the same period last year.

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This surge comes on top of another 38% y-o-y increase in finished steel imports in FY24 at about 8.3 million tonnes, as per government data. China, South Korea, Japan and Vietnam were the major origin countries for these imports.

As for demand, India's total demand in FY24 was 139 million tonnes, as per a government estimate, compared to roughly 160 million tonnes of operational capacity.

Aren’t lower steel prices good?

While the lower prices are good news for steel consuming industries like automobiles, consumer durables, infrastructure and real estate, experts said they pose a concern for domestic steel mills, which are investing heavily in brownfield capacity expansion across their sites.

As per an estimate by S&P, currently around 30 million tonnes of annual capacity addition are being undertaken by India's top five steelmakers—JSW Steel, Tata Steel, Steel Authority of India, Jindal Steel and Power and AM/NS India.

Domestic steelmakers are blaming surging imports on the price decline. “Heavy imports—at a lower price than production cost—are being dumped in the country," the executive cited above said, adding that China has limited options to sell, as many countries have brought in import restrictions. “Under these conditions, India is becoming a conducive dumping ground for everybody."

From January to July 2024, China overtook South Korea as the leading steel exporter to India, accounting for 43% of India's total steel imports, as per an estimate from S&P. In comparison, about 31% of the imported steel came from South Korea.

When questioned about higher domestic capacity resulting in an oversupply, the executive quoted above said that the domestic growth in demand has been in line with the capacity addition. The oversupply in the market is largely due to imports, this executive said.

“The government has given the steel industry the target of reaching 300 million tonnes annual capacity by 2030. We are working towards that. If imports are curtailed, then the domestic capacity is not high," he said.

While input costs have been favourable for steelmakers in recent months, the prices of iron ore and coking coal have not traced the fall in steel prices.

According to data from BigMint analysts, iron ore prices saw a slight uptick in September due to lower production during monsoon rains. Coking prices dipped marginally during the month but futures contracts firmed up slightly this week following news of a stimulus for the real estate sector in China, which is a major steel consumer.

India has initiated an anti-dumping probe into the imports of hot rolled steel products from Vietnam following an application filed by the Indian Steel Association (ISA), a lobby of domestic steelmakers. The industry is gunning for import protection against other major steel exporting countries, too.

The silver lining: analysts at BigMint are positive about the near-term. “As the festive season approaches, the market anticipates an increase in demand, which is likely to keep prices stable or lead to a slight rise in the near future," they said.