Turkey’s Growing Dependence on Chinese Steel Imports: Lessons for the Indian Steel Industry

The exponential growth of Chinese steel imports into Turkey has raised concerns within the Turkish steel industry, with the Turkish Steel Producers Association (TCUD) advocating for restrictive measures to safeguard domestic markets. The rapid surge in Chinese steel imports presents critical insights for the Indian steel industry as it grapples with similar challenges posed by cheap imports.

Overview of Turkey's Steel Import Surge

Turkey has witnessed a dramatic rise in Chinese steel imports in recent years. From 396,000 tons in 2020, imports from China grew to 1.9 million tons in 2022 and reached a staggering 3.3 million tons in 2023. Many nations have already taken steps to curb Chinese steel inflows, citing the need to protect their domestic steel producers from unfair competition. Turkey, however, finds itself at a crossroads, with rising imports posing risks to the sustainability of its steel sector and its broader economy.

Despite the overall decline in Turkish steel production over the past two years, the country increased exports of steel products by 45.3% year-on-year in the first seven months of 2024, while imports fell by 14.8% during the same period. These export gains and declining imports are a positive sign, but Chinese steel’s dominance in the Turkish market remains a challenge for the industry.

Key Takeaways for the Indian Steel Industry

As a major player in the global steel market, India faces a comparable challenge with cheap steel imports, particularly from China. The Turkish experience offers several valuable lessons for India as it navigates its own steel market dynamics.

1. Proactive Trade Policies Are Crucial

Turkey’s TCUD has called for immediate restrictive measures to prevent Chinese steel imports from overwhelming the domestic market. The Indian government has implemented measures such as anti-dumping duties and safeguards, but further strengthening of trade policies could be required to ensure domestic steelmakers are not exposed to unfair competition from cheap Chinese imports. Monitoring and responding quickly to trade practices, particularly from steel-exporting nations like China, will be essential to protect India’s steel sector.

India has previously witnessed rising import pressures, particularly during periods of global economic instability, such as the aftermath of the pandemic and recent global demand slowdowns. Similar to Turkey, failure to address these pressures could lead to significant underutilization of steelmaking capacities in India, hurting domestic players.

2. Enhancing Domestic Capacity Utilization

Turkey’s steelmaking capacity utilization was estimated at only 58.5% in 2023. India, with a production capacity of around 154 million tons, also faces underutilization challenges due to external competition and demand fluctuations. By adopting measures that incentivize domestic production and boost demand for locally produced steel, India could improve its utilization rates and ensure stable growth for its steelmakers. Investments in infrastructure, urbanization, and manufacturing should be encouraged to enhance domestic consumption and reduce dependency on imports.

3. The Importance of Economic Stability

Turkey’s macroeconomic instability contributed significantly to the decline in its steel production in 2022 and 2023. India’s steel industry is similarly vulnerable to economic fluctuations. To minimize this impact, the Indian government and private stakeholders must ensure that economic policies remain supportive of the steel sector. Reducing input costs, stabilizing raw material prices, and fostering steady demand are critical to maintaining the competitiveness of domestic producers.

4. Promoting Exports and Trade Partnerships

The increase in Turkey’s steel exports by 45.3% in January-July 2024 serves as a reminder of the importance of export-driven growth. For India, enhancing its global steel trade footprint is critical. Initiatives like Production Linked Incentives (PLI) for the steel sector can incentivize export growth, helping Indian steelmakers compete in international markets. Additionally, building stronger trade partnerships with countries seeking reliable steel supply chains outside of China could help India capture a larger share of the global steel market.

5. Developing Sustainable and Value-Added Steel Products

The Turkish steel industry is dominated by electric arc furnaces, known for their lower carbon footprint compared to traditional blast furnaces. India, aiming for decarbonization of its steel sector, could take inspiration from Turkey's steel production methods and accelerate its transition toward sustainable steelmaking. Furthermore, India’s steel industry should invest in value-added products such as high-strength steel and advanced alloys, which could reduce the industry's vulnerability to low-cost imports and enhance export competitiveness.

Conclusion: Strengthening India's Steel Sector

Turkey’s experience with Chinese steel imports highlights the risks that excessive reliance on foreign steel can pose to domestic markets. For India, which is similarly exposed to the pressures of cheap imports, a comprehensive strategy involving proactive trade measures, improved capacity utilization, and economic stability is crucial. By focusing on sustainable production and promoting value-added products, India can shield its steel industry from external competition while enhancing its position as a global steel powerhouse.

With a focused approach to trade policy, production efficiency, and export growth, India can learn from Turkey’s challenges and ensure its steel sector remains resilient in the face of evolving global trade dynamics.