China’s Steel Dump: Could It Undermine India’s Ambitions?

Tata Steel's CEO has raised a red flag over the rising tide of low-cost Chinese steel imports, cautioning that it could derail investment plans in India’s steel sector.

"If this continues for very long, it will have an impact on the investment plans that the steel industry is making," said TV Narendran, Chief Executive Officer and Managing Director of Tata Steel.

His statement highlights the challenges faced by Indian steel producers, who are grappling with a glut of goods from Chinese rivals as the effects of overcapacity and sluggish domestic demand spill over into global markets.

Post-Pandemic Boom

India’s steel sector has surged to new heights post-pandemic, showcasing unprecedented growth across production, capacity, and consumption.

Crude steel production jumped from 109.1 million tonnes (MnT) in 2019-20 to an impressive 144.3 MnT in 2023-24, while production capacity expanded from 142.3 MnT to 179.5 MnT per annum over the same period, paving the way for this extraordinary rise.

But it’s not just about making more steel—it’s about using it. Domestic consumption of finished steel hit a historic high, leaping from 100.17 MnT to 136.29 MnT over the same period, indicating robust domestic demand.

Crucial to this success has been the National Steel Policy (NSP) 2017, which aims to scale up India's crude steel capacity to 300 million tonnes by 2030 to cater to its domestic requirements.

In essence, India’s steel sector is poised to meet—and perhaps exceed—demand.

The Devil's in the Detail

India became a net exporter of finished steel over the past decade. In fact, during the last four years, India was a net exporter of finished steel each year.

But FY24 marked a turning point, with India becoming a net importer of the alloy, sparking concerns across the industry.

Data from the steel ministry’s Joint Plant Committee (JPC) reveals a striking 38 per cent surge in imports of finished steel to 8.319 MnT in FY24, compared to 6.022 MnT imported during the preceding 2022-23 fiscal.

This shift is largely attributed to price differentials between international and domestic prices of finished steel. Low prices in the international market led to reduced profit margins for exports and made imports more affordable, affecting the steel trade balance, the Economic Survey 2023-24 highlighted.

The trend shows no signs of easing. In the first five months of FY25, imports jumped another 33.9 per cent, reaching 3.72 MnT, as the gap between production (58.93 MnT) and consumption (60.27 MnT) continues to widen.

Industry leaders are sounding the alarm, warning that India’s return as a net importer in FY24 poses a serious challenge to the country's vision of becoming Atmanirbhar in steel production.

China's Playbook

China, the undisputed giant of global steel production, is set to export over 100 million tonnes of steel in 2024—its highest level since the 2015-2016 economic slowdown, according to Shanghai-based consultancy Mysteel.

With China accounting for a staggering 55 per cent of global steel output, even a slight uptick in exports can send ripples through world markets, triggering price pressures.

The surge is largely driven by sluggish domestic demand as China struggles to recover from the pandemic’s economic fallout and a long-running property crisis. As a result, the world’s largest steel producer is flooding markets, primarily in Southeast Asia and Europe, with excess supply.

“There’s too much steel in the world,” said Colin Richardson, head of steel at price reporting agency Argus Media. “Even with a pullback in China, there will be too much steel.”

But there's more to the story. China is strategically leveraging its steel exports to expand its global influence, funnelling material into infrastructure projects under its Belt and Road Initiative. As China builds roads, railways, and ports in developing markets, it’s not just shaping economies—it’s reshaping geopolitical alliances.

Not Just China

While China often steals the spotlight in discussions about steel imports, the reality is far broader. Recent data from the Joint Plant Committee (JPC) reveals a seismic shift in global steel imports, with several countries joining China in ramping up their exports.

China's finished steel imports have surged by 31.7 per cent. However, Japan is leading the charge with a staggering 130 per cent increase, followed by Vietnam at 52 per cent and Korea at 6 per cent.

In fact, around 62 per cent of steel imports to India now come from Free Trade Agreement (FTA) partners at zero duty, raising questions about the need to reassess the rules of origin under these agreements.

The steel import game is shifting—and it’s not just China at the helm anymore.

Tariff Tensions

Western producers are holding their ground against rising Chinese steel exports by imposing tariff and non-tariff barriers and green steel subsidies.

The US is steadfast in enforcing Section 301 tariffs, slapping a 25 per cent duty on Chinese steel, with the possibility of even steeper rates if political promises hold. President-elect Donald Trump has already proposed to levy a 60 per cent tariff on all goods from China and a 10-20 per cent tariff on other countries.

Meanwhile, back home, Indian steelmakers are urging swift government action to counter the influx of cheap imports, fearing for their bottom lines.

In a letter to Finance Minister Nirmala Sitharaman, the Indian Steel Association (ISA)—representing industry giants like JSW Steel, Tata Steel, ArcelorMittal Nippon Steel, and state-run Steel Authority of India—has called for a doubling of customs duties on steel imports from 7.5 per cent to 15 per cent.

"Industry is concerned about the surge in imports of steel into India at predatory prices and the threat posed by China's downturn," ISA said in the letter to Sitharaman.

The trend of cheaper steel imports is likely to continue, ISA stated. "There is an imminent threat of a further surge in imports in the coming months," it added. A decision on the proposed tariff hike is expected in the next six months, but the clock is ticking.

Divided House: Producers vs. MSMEs

India’s steel tariff debate has exposed a rift between large producers and MSMEs, as both sides grapple with the impact of protectionist policies.

Big steel producers are pushing for higher tariffs to combat the influx of cheap Chinese steel, but for MSMEs, this move could spell disaster. Many micro, small and medium enterprises (MSMEs) rely on imports from China and Vietnam, as the larger producers often prioritise exports over local supply, driven by the incentives offered.

"If you increase taxes on steel imports, input costs will rise by 10 to 20 per cent. How will MSMEs survive?" questions Vinod Kumar, President of the India SME Forum, highlighting the precarious position these small businesses find themselves in.

Despite these concerns, the government remains firm in its support for higher tariffs, putting India’s steel sector at a crossroads.

What Lies Ahead

China’s steel consumption is on a long-term decline, but its mills are defying reality, churning out near-record production. Last month alone, over 11 million tons of steel were exported—a nine-year high.

Unless Beijing rips up its current playbook—reviving its housing market or ramping up infrastructure spending—the oversupply is set to persist.

The International Monetary Fund (IMF), in a blog earlier this month, has warned of a looming “China shock 2.0,” where China’s trade surplus could disrupt industrial activity and displace workers worldwide. For India, the growing influx of Chinese imports is a pressing challenge.

The path to self-reliance isn’t easy, but it’s crucial. India needs bold, forward-thinking policies that do more than boost domestic manufacturing—they must address deep-rooted structural issues and enhance global competitiveness. While initiatives like the Production Linked Incentive (PLI) scheme have shown encouraging results, there remains significant ground to cover.

As the steel storm brews, India must act decisively to secure its industrial future.