Analysis: Indian steel mills feel crunch from cheap Chinese imports

Steel Authority of India

04/12/2024 03:38

* 
      Chinese supplies outprice Indian steel in export markets
    

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      Capacity utilisation of smaller Indian steel mills down
over 30%
    

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      Small steel producers offer deep discounts, consider job
cuts
    

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      Small steelmakers plan to cut production next year as well
  
    

        * 
      India concerned about future steel demand to sustain
growth
    

  
    By Neha Arora
       MANDI GOBINDGARH, India, Dec 4 (Reuters) - India's
construction boom with its gleaming highrises and multilane
highways was supposed to drive up domestic steel sales, but
Jogindra Group's mills in northern Punjab state are filled with
unsold inventory. 
    A flood of cheap Chinese steel has pushed India's smaller
mills to scale down operations and consider job cuts, as the
South Asian nation joins a growing list of countries
contemplating action to stem imports. 
    India, the world's second-largest steel maker, turned into a
net importer in the last fiscal year, sounding alarms in New
Delhi about what a weakened sector portends for the security of
future infrastructure projects and steel-reliant industries.    
    At small and medium-sized mills, which account for 41% of
India's total steel output and employ more than 1.5 million
people, capacity utilisation has dropped by nearly a third over
the past six months, executives from a dozen such producers said
in interviews.
    In Mandi Gobindgarh, Punjab's "steel city", the cluster of
mills is unable to compete with Chinese imports often sold at up
to 10% less than Indian offerings. 
    "If we are not able to compete in the market, our plant
won't run at full capacity," said Adarsh Garg, chairman and
managing director at Jogindra Group. 
    "We will be forced to lay off 10% to 15% of our employees
here if this continues," Garg said.
    Despite offering discounts on its products, the company's
sales have dropped 30% to 35% in the past six months, forcing it
to cut output by nearly a third, Garg said.
    Raju John, director general of the Builders Association of
India, said developers and engineering firms are lured by the
savings. Chinese steel sells for $25 to $50 a metric ton cheaper
and sometimes as much as $70.
    Finished steel imports from China reached an all-time high
this year, up more than 30%, and included both hot-rolled steel
used in construction and galvanised steel for the automobile
industry.     
    The influx has battered domestic sales while China's lower
prices have also eroded Indian exports.
    
    'EVERYONE IS BLEEDING'
    China produces more steel than the rest of the world
combined, and its bargain offerings on the global market have
prompted widespread trade complaints. 
    That output, expected to continue in 2025, coupled with
heightened export volumes since China's property crisis battered
demand from the domestic construction industry, has rattled
steel markets overseas, even in countries with a strong local
industry. 
    "Surging imports at predatory prices with reducing export
opportunity is today a major concern for the survival of (the)
Indian steel industry," the Indian Steel Association said in a
presentation to the government.
    The association said steel companies are struggling to
initiate expansion plans after their profit margins dropped by
68% to 91% so far this fiscal year.
    Prices have suffered with hot-rolled coil used in
construction plummeting to a three-year low earlier this year. 
    While smaller steelmakers have been hit the hardest, even
big Indian producers such as JSW Steel  JSTL.NS  and Tata Steel
 TISC.NS  are concerned and have backed the association's
efforts to push for curbs on Chinese imports. 
        The process to impose import curbs, which could take
four to six months, is subject to paperwork completion by the
industry and a subsequent government investigation to determine
whether Chinese imports are harming Indian steel mills. 
    New Delhi is keen to avoid mass layoffs for the industry's
2.5 million workers as India struggles to employ its surging
population.  
    Steel also fortifies India's rapid development, from new
housing to massive infrastructure projects required to sustain
the world's fastest-growing major economy. 
    A senior government official with knowledge of the matter
said the financial stability of steel companies is required to
ensure future demand is met. 
    
    Steel mills across India are feeling the pinch. 
    "During July-September, the export orders we were waiting
for did not come through because we lost business to China,"
said Sagar Yadav, a senior general manager at Goodluck India
steel mills in the northern state of Uttar Pradesh. 
        In the western city of Pune, Neo Mega Steel has lost
orders from the automobile industry to Chinese rivals, said
Managing Director Vedant Goel. 
    And in western Maharashtra state, Bhagyalaxmi Rolling Mill
has been hit by a sharp drop in exports.
    Nitin Kabra, a director at the mill, said he expects
production cuts at the start of next year. 
    "Chinese imports have impacted our margins and morale,"
Kabra said.  
    "Prices have fallen so low that everyone is bleeding." 
($1 = 84.33 rupees)

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India's imports of Chinese steel during April-August    https://reut.rs/3NKamT1
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 (Reporting by Neha Arora; Additional reporting by Jatindra Dash
in BHUBANESWAR; Editing by Mayank Bhardwaj, Tony Munroe and Saad
Sayeed)
 ((neha.dasgupta@tr.com; X.com: neha_5))