Steel Imports Threaten Domestic Industry’s Growth, Says ICRA in FY25 Outlook

The country’s domestic steel sector will have a very tough year going ahead with capacity utilization likely to slide below 80% for the first time in four years in FY25, according to rating agency ICRA. An upswing in cheaper imports and less-than-vibrant demand for exports threatens to impede its aggressive capacity building plans.

ICRA points out that whereas domestic steel demand is likely to grow at a healthy 10-11% in FY25, finished steel production is expected to increase only by 5%, mainly on account of cheaper imports. The major producers have been up in arms over the rise in imports, especially from China, which accounted for 30% of the total steel imports during the first seven months of FY25. Additionally, 59% of the imports came from the FTA countries with no import duty such as Japan, South Korea, and Vietnam.

Senior Vice-President and Group Head of Corporate Sector Ratings at ICRA, Girishkumar Kadam, noted that capacity utilisation in the steel industry is likely to go down to 78% in FY25 from 85% in FY24. “The post-Covid ‘impossible trinity’ of maintaining above 80% utilization, a strong investment pipeline and healthy leverage is now facing pressure,” Kadam said.

Domestic steel mills in India are increasingly being outcompeted by the landed cost of imported hot-rolled coils, as HRC imports from China and Japan have undercut domestic prices. As of November 2024, domestic HRC prices were $12-16 per tonne above imports from China and Japan, putting pressure on profit margins.

The continued capacity expansion of 90-95 million tonnes per annum (mtpa), which would entail investment of $45-50 billion, is at risk if earnings do not improve. FY25’s net finished steel imports are likely to surge, as during the FY16 metals downturn.

With basic customs duty at 7.5% and most tariff protection measures like anti-dumping duties now expired, domestic producers are demanding renewed safeguards to counter import pressures. ICRA estimates that finished steel imports could claim 7-7.5% of India’s market share in FY25, the highest in six years.