- US supplies around 15% of India’s steel, Al scrap imports
- PM to visit US soon; India may seek tariff exemptions
On Monday, US President Donald Trump raised tariffs on steel and aluminium imports to a flat 25%, removing all exceptions or exemptions, sending shockwaves through the global trade landscape. However, he said that he would consider exempting Australia from the steel tariffs.
This bold move is aimed at helping struggling US industries but also carries the risk of igniting a multi-front trade war. The decision affects not only the US but also countries such as India, whose industries are closely tied to global supply chains for these metals.
BigMint goes behind the scenes, uncovering what the tariff hike means for India, its steel and aluminium sectors, and the broader economy.
How will Trump’s tariffs on steel, aluminium impact India?
According to BigMint’s data, the US imported around 22.2 million tonnes (mnt) of steel in 2024. A significant portion of these imports – 5.48 mnt – came from Canada, with the country’s shipments to the US accounting for a substantial 96% of its total steel exports. This highlights Canada’s heavy reliance on the US steel market.
In contrast, India’s steel exports to the US in 2024 amounted to just 0.23 mnt, a mere 3% of its total steel exports. This puts India in a relatively insulated position as far as the potential direct impact of President Trump’s new steel tariffs is concerned.
Sandeep Poundrik, the Steel Secretary, emphasised this point, stating, “With a robust domestic market and minimal exports to the US, India’s steel industry will largely be unaffected.” India’s steel industry benefits from a strong internal market, and its limited exposure to the US market means it is less vulnerable to trade disruptions caused by the new 25% tariffs.
While the US tariff hike could create challenges for countries more heavily reliant on steel exports to the US, such as Canada, India’s relatively small footprint in the US market positions its steel sector to weather the storm with less disruption.
When it comes to aluminium, the scenario mirrors that of steel. In 2024, India exported around 2.4 mnt of aluminium, which includes both semi-finished and finished products. Of this, only around 0.15 mnt was sent to the US. This makes up a minor fraction of India’s total aluminium exports, reflecting India’s limited exposure to the US market in this sector as well.
Much like steel, Canada is the major supplier of aluminium to the US. In 2024, Canada exported 3.6 mnt of aluminium to the US, accounting for roughly 33% of the total 10.89 mnt of aluminium Canada exported globally.
Given India’s minimal exports of both steel and aluminium to the US, the overall impact of the new 25% tariffs on these sectors will likely be negligible.
Will India’s scrap supply be impacted?
Another ripple effect of Trump’s tariff hike concerns the global scrap trade – for both ferrous as well as non-ferrous metals. The US has been the largest supplier of aluminium and ferrous scrap to India, and with domestic demand for scrap rising in the US, exports to countries such as India might see a decrease.
In 2024, India imported approximately 1.5 mnt of ferrous scrap from the US, representing about 15% of the total 8.46 mnt imported. Similarly, India’s aluminium scrap imports from the US in 2024 were around 0.5 mnt, accounting for 19% of the total 1.7 mnt of imports.
There are two possible scenarios. First, the US, being a scrap-dependent market for ferrous metals, might increase its imports from countries such as Canada and Mexico, as the tariffs on steel could limit its ability to import finished steel products. In 2024, Canada supplied 3.18 mnt of ferrous scrap to the US, which makes up a significant portion of the total 4.6 mnt exported by it. Meanwhile, Mexico contributed 0.90 mnt of ferrous scrap to the US.
The second scenario involves the US consuming more of its own domestic ferrous scrap to produce steel, which would reduce the availability of scrap for export to other countries.
A similar trend has already been observed in the aluminium market, where the US has limited the export of aluminium scrap to other countries due to strong domestic demand. This further compounds the challenges for countries such as India, which depends heavily on imported scrap – especially for aluminium. India sources 90% of its scrap requirements from imports, and with other countries, such as the EU, beginning to restrict exports, it will become increasingly difficult for India to meet its scrap needs.
However, the Indian government is taking proactive steps to address these challenges. Policies such as the vehicle scrappage programme are being implemented to boost domestic scrap generation, which could help reduce dependency on foreign scrap in the long term. Despite these efforts, the current scenario poses significant obstacles for India’s aluminium and steel industries.
What do market participants foresee?
A trader opined, “US tariffs will definitely impact Indian steel plants in the short-to-mid-term. They will need to find alternative ways to export to the US market. For aluminium, the rise in local demand for aluminium and ferrous scrap in the US could drive up raw material costs for plants here. Manufacturers will likely have to raise their bids to secure scrap for production. I foresee a lot of challenges ahead for mid-to-small-sized plants, especially with the INR depreciation, as their scrap costs remain uncontrollable. Until local demand picks up, steel plants will continue to face significant struggles.”
Another market participant stated, “We are likely to see a surge in aluminium trade from Canada to Europe if the tariffs apply to Canadian and Mexican imports. Trading companies are already selling European physical premiums, anticipating more Canadian metal flowing into Europe. If the tariffs on Canadian aluminium are sustained, expect the metal to flood Europe first, until the market absorbs the supply. Once that happens, excess metal could shift to Mexico or Brazil.”
He also noted, “In Europe, increased Canadian imports could reduce premiums, since demand is weak and the premiums are high, mainly due to tight supply. However, with blanket tariffs on all aluminium imports, the impact on Canadian trade flows will not be as significant. If only Canada faces tariffs, we could see Middle Eastern and South American metal becoming more competitive in the US market. Still, with tariffs on all imports, Canadian aluminium remains attractive to US buyers due to the shorter shipping times.”
Will India get an exemption?
While the tariff hike poses challenges, there’s a possibility that India may receive an exemption. Back in 2019, in response to Trump’s tariffs, India imposed retaliatory tariffs on 28 US products. In the aftermath, both nations reached a trade resolution, with the US recognising the need for balance.
In the coming weeks, as Prime Minister Narendra Modi heads to the US for discussions, all eyes will be on whether India can negotiate an exception for its steel and aluminium exports. India’s strategic trade ties with the US might work in its favour, but the outcome remains uncertain.
The road ahead
Trump’s new tariffs on steel and aluminium imports are expected to heavily impact global trade, with India likely facing reduced exports (to other countries if not the US) and increased market pressure, especially in the steel and aluminium sectors. However, ongoing trade negotiations and India’s strong ties with the US may offer hope for a favourable resolution. The exact implementation date of the tariffs is 4 March 2025; till then, the market will need to closely monitor developments.
Leave a Reply