India's steel safeguard duty offers a short-term fix—but will it be enough?

Mint

24-04-2025

India has fired a warning shot in the global steel trade war.
In a move to stem the tide of cheap foreign supply, the Indian government has imposed a 12% provisional safeguard duty on flat steel imports from China and Vietnam. The duty, effective for 200 days, is aimed at shielding domestic producers from a surge in underpriced imports.
The timing is significant. India has become a net importer of steel for the second year in a row, with imports hitting a nine-year high of 9.5 million tonnes in FY25, while exports slumped over 60% to 6.9 million tonnes.
The surge has raised alarms over dumping—especially from China, which has been offloading excess capacity globally as domestic demand slows and tariff tensions with the US escalate.
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So what does the safeguard duty mean for India's metal companies? Here's a closer look.
China, South Korea, and Japan accounted for nearly 80% of India's steel imports in FY25.
While India is the world's second-largest steel producer, it has been unable to shield its market from a surge in low-cost supply—particularly flat products used in construction, infrastructure, and manufacturing.
Much of this supply is aggressively priced, with Chinese producers ramping up exports instead of cutting output as domestic demand slows. Some shipments are even routed via Vietnam, further muddying trade flows.
India's domestic producers have taken a hit, triggering calls for government intervention.
The Indian Steel Association—which represents major players such as JSW Steel, Jindal Steel, and Steel Authority of India—urged the government to step in as falling prices eroded profit margins.
Hot-rolled coil (HRC) prices, for instance, dropped to a four-year low of
₹
46,500 per metric tonne in September 2024, before rebounding to
₹
51,300 in April 2025 as expectations of a safeguard duty took hold.
Industry capacity utilization also declined, slipping to 78% in FY25—its lowest level in four years—amid waning demand.
In response, the Directorate General of Trade Remedies launched a probe in December 2024 into a sharp spike in imports of alloy and non-alloy flat steel products, which are widely used across sectors such as automobiles, capital goods, and farm equipment.
Adding urgency was the US decision to levy steep duties on Chinese steel, prompting fears that Beijing would flood alternative markets—including India—with its surplus production.
To counter the flood of cheap imports, India on 21 April imposed a 12% provisional safeguard duty on alloy and non-alloy flat steel products from China and Vietnam. The measure, valid for 200 days, is intended to create a price floor and restore a level playing field for domestic producers.
But the levy isn't blanket. To avoid disrupting legitimate trade, the government has carved out exemptions for higher-priced shipments. For instance, no duty applies if hot-rolled coil (HRC) is priced above $675 per tonne—ensuring that only underpriced, potentially dumped imports are penalised.
Analysts expect the duty to sharply curtail imports—by as much as 50% in FY26, according to rating agency
Icra
Ltd—giving local producers room to reclaim market share.
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Domestic demand is projected to grow 7–8%, and capacity utilisation could climb back to 83%, up from a four-year low of 78% in FY25, it added.
That could translate into stronger pricing power and margin recovery, especially with input costs like iron ore and coking coal still near cyclical lows.
JSW Steel
, with its heavy tilt toward flat products, stands to gain the most.
Steel Authority of India Ltd (SAIL) may see the biggest earnings bounce, though off a low base. Jefferies estimates that a 15% duty could lift HRC prices by 10% and boost Ebitda by 15–40%. But rising mineral levies from state governments could erode some of those gains.
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Short-term relief may not translate into sustained earnings growth.
Analysts caution that global oversupply, tepid infrastructure spending, and muted domestic demand could keep a lid on steel prices. India's steel consumption rose just 3.4% in FY25, a sharp slowdown from 11.7% the year before.
Despite the safeguard duty, domestic hot-rolled coil prices remain steep—about 18% higher than comparable imports. Even after the duty, they hold a 6% premium, leaving little headroom for further price hikes. That could blunt the impact on profitability.
There are structural hurdles too.
HDFC Securities notes that nearly two-thirds of India's steel imports come from countries with Free Trade Agreements—such as Japan, South Korea, and Mauritius—that are exempt from the new duty. In fact, South Korea has now overtaken China as India's top steel supplier.
Still, the sector's long-term outlook remains intact. India's per capita steel consumption is just 93 kg—far below the global average of 220 kg. The government aims to raise this to 158 kg by 2031 under the National Steel Policy, banking on rising urbanisation, industrial growth, and infrastructure buildout.
For more such analyses, read
Profit Pulse
.
For now, the safeguard duty offers a temporary shield. But the industry's fortunes will ultimately hinge on a revival in domestic demand, macroeconomic stability, and how China manages its slowing economy.
About the author: Madhvendra has over seven years of experience in equity markets and has cleared the NISM-Series-XV: Research Analyst Certification Examination. He specialises in writing detailed research articles on listed Indian companies, sectoral trends, and macroeconomic developments. Follow him on LinkedIn.
Disclosure: The writer does not hold the stocks discussed in this article.
The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.