Indian steel market fears export market price drops if Section 232 tariffs applied

Indian steel product export prices could fall if high import tariffs are applied to steel from countries such as South Korea, Turkey and Japan by the United States, sources have told Metal Bulletin.

Any price drops for steel from South Korea, Turkey and Japan - which depend on steel exports to the US more than Indian steel mills do - would depress market conditions for Indian steel exporters too, sources said.

One of the three recommendations proposed to US President Donald Trump by the Section 232 report is that steel imports from 12 countries - including India, South Korea and Turkey - could be subject to tariffs of 53%. President Trump has until April 11, 2018 to decide which measures, if any, he will take.

Indian steelmakers such as JSW and Bhushan Power & Steel have been competing with hot-rolled coil (HRC) from China, Japan and South Korea in export markets such as Vietnam and Saudi Arabia in recent months.

Offers into Saudi Arabia from Indian steelmakers were heard at $650 per tonne cfr on Tuesday February 20, compared with the last China-origin material at $650-660 per tonne cfr.

Metal Bulletin’s price assessment for Saudi Arabian import HRC was $650-660 per tonne cfr on Tuesday February 20.

A “chain reaction” of the US import tariffs could mean a cut in Chinese HRC prices, leading Japan and South Korea to follow suit in order to remain competitive in Southeast Asian export markets, which would also put pressure on Indian prices for the material, according to one scrap source.

Indian steel prices could also be affected as a result of any negative effects in Turkish markets, one mill source told Metal Bulletin.

“If Turkey is affected, it could drop their billet and scrap prices, which would decrease Indian prices too,” the producer source said.

Indian domestic steel prices for products such as rebar and HRC have made a strong start to the year, bolstered by robust domestic and export demand.

Metal Bulletin’s price assessment for Indian domestic HRC was 42,750-43,250 rupees ($658.96-666.66) per tonne ex works on Friday February 16, up from 41,750-42,250 rupees per tonne one month ago.

While prices for domestic rebar in India have shot up considerably to 36,200-36,500 rupees, on an ex-works basis, on February 16 from 33,500-33,800 rupees, ex-works, the week prior.

Limited import threat

Yet even if prices in Japan and South Korea decrease, market sources thought it’s highly unlikely that India would be susceptible to a rise in cheap imports to their own domestic markets.

India has several anti-dumping duties on products including HRC and stainless steel sheet, while importers of steel goods must also be certified by the Bureau of Indian Standards (BIS), restricting the number of companies that can supply into the country.

Only two Chinese mills currently have BIS certification to supply rebar into the country, the mill source said.

“I don’t think Indian mills will be worried. If they see more Japanese and South Korean material coming in at low prices, they will go straight away to the government for some corrective measures,” one trading source said.

Effect on Indian exporters

Although the US is not a highly important export market, imports of India-origin steel products to the US rose 209% year on year for the January-November period of 2017, according to the US Commerce Department.

“Indian exports to the USA are quite limited apart from value-added products like pipe,” one trading source said.

Pipe producer Welspun ships several thousand tonnes of material to the US each month and will be directly affected by the tariffs, another mill source said.

Tata Steel, JSW and Bhushan Steel export considerable volumes of flat steel to the US, one Indian mill source said, but other sources contested the companies’ reliance on the US given their higher focus on Southeast Asian export markets of late.

Tata Steel and JSW spokesmen declined to comment on the matter.

One steel export that was gathering steam in the US was wire rod, the trading source said.

“India was emerging as a good source of wire rod but still there was not even 50,000 tonnes of imports last year,” he said.

“Now there’s no bookings as India has low availability, but [bookings to the US] will stop [for good] now,” he added.

And if tariffs are applied by the US, American authorities can expect Indian companies to contest this, sources said.

“If there is a trade restriction, companies will go and seek legal advice,” another mill source said.

“JSW will try to take this forward at the WTO and the World Steel Association will try to take it forward,” the first mill source said.

This has been done before in the past, when countries including Taiwan and Russia requested consultations with the WTO over India’s use of a minimum import price on steel imports in January 2017.

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