Export Surge in October'24: A Sign of Indian Steel Market Recovery

India's steel industry has witnessed significant developments over the past month, marked by an 11% surge in exports and a 4% drop in imports in October 2024. According to data from the Ministry of Steel, these trends reflect a positive outlook for the sector, with exports reaching 4.4 million tonnes and imports dropping to 9.8 lakh tonnes due to government-imposed restrictions on low-quality steel imports from countries like Vietnam. This report provides an analytical overview of the current market dynamics, export and import trends, and the sector’s anticipated growth driven by both policy measures and robust domestic demand.

Export Growth: A Positive Outlook

India's steel exports increased from 4 lakh tonnes in September to 4.4 million tonnes in October, marking a significant turnaround for the sector. This growth aligns with an improved global demand outlook, coupled with competitive pricing and quality enhancement by domestic producers. Export growth is critical in offsetting any domestic demand fluctuations, providing a buffer that enhances profitability for Indian steel companies.

The global steel market faces challenges from various economic factors, yet India’s increased exports suggest that Indian steel is becoming increasingly competitive in the global market. Factors such as India's cost advantages, production efficiency, and favorable trade relationships with key import markets are enabling Indian steel to gain market share internationally.

Decline in Imports: Government's Role in Market Protection

October marked the first month of declining steel imports in the 2024-25 financial year, a 4% reduction from September's 11 lakh tonnes to 9.8 lakh tonnes. This decline follows restrictions placed on low-quality imports, a strategic move by the Indian government aimed at preventing unfair competition in the domestic market. The government's stringent import quality checks and policies are likely to foster a healthier market for Indian steel producers by reducing pressure from low-cost imports that have previously depressed domestic prices.

Reducing imports from low-cost exporting countries will allow domestic producers to adjust prices in line with demand, safeguarding their margins. For example, SAIL observed a 2% increase in the price of long steel products to Rs 53,000 per tonne in October. This price stability indicates a recovering market and suggests that government measures to curb imports have effectively supported domestic producers.

Price Trends and Implications

Prices for steel products have shown recovery after a sharp decline in September. Jayant Acharya, CEO of JSW Steel, highlighted a price improvement trend, attributing it to increased domestic demand and a reduction in import pressure. The sector had experienced a price slump earlier due to record-high imports, which disrupted market equilibrium.

This upward price movement benefits Indian steelmakers by enhancing profitability and offsetting rising costs associated with production, labor, and energy. The stabilizing prices in the domestic market reflect improved demand and reduced foreign competition, suggesting that the price recovery will likely continue into the third quarter of FY2024-25, barring significant external shocks.

Demand Drivers: Infrastructure and Construction Boom

India’s steel production is projected to reach 152 million tonnes in FY2024-25, reflecting an 8% annual growth. This increase is primarily driven by the Indian government’s ambitious expenditure on infrastructure projects. Major projects in sectors like highways, ports, and railways are anticipated to create strong demand for steel, bolstering the sector’s growth trajectory.

Beyond infrastructure, the construction sector’s expansion—spurred by rapid urbanization and housing development—fuels demand for long and flat steel products. With construction activities intensifying, demand for steel is expected to remain robust, particularly in Tier 2 and Tier 3 cities, where urbanization trends are accelerating. Additionally, sectors like automotive and consumer goods, where steel remains a critical input, contribute to an overall demand increase.

Challenges and Outlook

Despite the positive growth indicators, the Indian steel sector faces challenges, including volatile global demand, energy costs, and policy adjustments. The potential re-emergence of low-cost imports could pressure domestic prices if protective measures are relaxed. Furthermore, global economic fluctuations may influence steel exports, with demand in key markets remaining uncertain.

However, given the ongoing government investment in infrastructure and construction, along with a proactive policy approach, India’s steel sector is positioned to capitalize on domestic demand growth. The gradual shift towards cleaner production processes, such as the integration of green hydrogen and biochar in steel production, also indicates a long-term focus on sustainable practices within the industry.

Conclusion

The outlook for India’s steel sector remains promising, as reflected by the 11% export growth and stabilizing domestic prices. The government’s import restrictions have provided necessary protection for domestic producers, enhancing their profitability and price stability. With infrastructure projects and urbanization driving demand, India’s steel industry is set for continued growth, positioning it as a global player. However, careful navigation of market challenges and consistent policy support will be essential in sustaining this momentum and realizing the sector’s full potential in the coming quarters.