The US tariffs on steel are unlikely to impact India significantly, as only two percent of the country's total finished steel exports in the first nine months of this fiscal year went to the US, according to a report by India-based Crisil Intelligence on Wednesday, February 19.
However, earlier this month the Indian rating agency ICRA had said that the Indian steel market may become a victim of diverted shipments putting pressure on local prices, following the levy of 25 percent tariffs by the US Administration on all steel and aluminium imports into the US.
ICRA said that the US trade measures cut both ways for the domestic steel industry. First, deliveries of four million mt to the US from Asian suppliers like Japan and South Korea, which up to now had preferential market access to the US, could be partly diverted to high-growth regions like India.
Taking a similar view, Moody's in a report this month also said that Indian steel producers will face increased challenges in exporting their products following the US decision to impose an additional 25 percent tariff on all steel and aluminium imports announced by the Trump Administration, as over the past 12 months high steel imports into India have already dampened prices and earnings of steel producers.
In its latest report, Crisil Intelligence said that the US has decided to impose a flat 25 percent tariff on steel imports from March 12, replacing the previous system of multiple lesser levies. "It will reduce the exports of its trade partners as local production increases. However, India is unlikely to be impacted materially because only two percent of its total finished steel exports in the first nine months of this fiscal year were to the US," Crisil Intelligence said.
But at the same time, it acknowledged in its report that tariffs may lead to the diversion of exporters' inventories to other importing nations at competitive prices, especially in an environment of increasing global competition, and this could further lower steel prices in India, which are already trending at four-year lows.
"Therefore, this means that the Indian government may need to intervene with safeguard duties to support domestic capacities. The timing and magnitude of such action will be critical," Crisil Intelligence said.
It added, "Increased production by US mills will likely reduce the availability of steel scrap for exports. This is because about 70 percent of the steel industry in the US uses the electric arc furnace process, which relies on scrap to produce steel. Currently, India sources around 14-15 percent of its scrap requirements from the US."
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