Safeguard Duties On Steel Imports To Have Limited Impact On Indian Industry: HDFC Securities

New Delhi, Feb 18 (KNN) A recent report by HDFC Securities suggests that any potential safeguard duties imposed by the Indian government on steel imports would have a limited overall impact on the domestic steel industry.

According to the report, a significant portion of steel imports—approximately 62 percent—originates from countries with which India has Free Trade Agreements (FTAs).

The report specifically notes, “The levy of duty would have limited impact as majority of steel (around 62 percent) is imported from FTA countries at nil duty and any duty hike will not have any impact on these shipments.”

Most steel imports to India come from countries such as Japan, South Korea, Mauritius, and the ASEAN bloc, which can export steel to India duty-free under existing trade agreements.

However, the report emphasised that safeguard duties would play a crucial role in curbing steel imports from China, which is currently flooding global markets with lower-priced steel due to weak domestic demand within China.

The Indian government is considering imposing these safeguard duties as a protective measure for local producers who are struggling to compete.

If implemented, the duties would increase the cost of imported steel in the domestic market, potentially making Indian-made steel more competitive. The move is expected to primarily reduce steel imports from China, which does not benefit from FTA exemptions.

Industry experts believe that while the duty may provide some short-term relief, it will not completely resolve the challenges facing the sector. The inflow of inexpensive Chinese steel has significantly impacted Indian manufacturers, reducing both sales volumes and profit margins.

From a production capacity of 1 million metric tons of crude steel at independence in 1947, India has grown to become the world's second-largest producer with 180 million metric tons capacity by the end of FY24.

India's per capita steel consumption in 2023 stands at approximately 93kg, considerably below the global average of 220kg.

This gap highlights substantial room for growth as the country continues to urbanise and industrialise. The National Steel Policy aims to increase India's per capita steel consumption to 158kg by FY31.

The report also noted that rural per capita steel consumption, which is around 22kg in 2023, remains significantly below the national average, creating a drag on overall growth.

However, with the government prioritising rural development and increasing investments in rural infrastructure, analysts anticipate a gradual convergence of rural steel consumption with the national average, which could drive incremental demand in the sector.

(KNN Bureau)