On 7 March 2018, the U.S. government announced steep import tariffs of 25% on steel imports from all the countries across the globe exempting only Canada and Mexico indefinitely under NAFTA (North American Free Trade Agreement).
Now the majority of nation especially Asian countries are condemning this act by the U.S. government as high quantity of U.S.’s steel imports come especially from South Korea, Japan, and also from China. While Japan’s steel industry body said that U.S.’s tariffs will seriously harm the country’s steel exports, South Korea said it may file a complaint to the World Trade Organisation (WTO) and China vowed to make a ‘justified and necessary response’ to tariffs.
Limited direct Impact on Indian steel sector
SteelMint has learnt that direct impact of U.S. duty on Indian steel industry will be limited as country’s export volumes to U.S. are not so high. According to U.S.’s customs data, in 2017, out of the country’s total steel (finish and semi-finish) imports, India’s share stood to be very low at 2.42% at 0.73 MnT. India exported about 0.48 MnT of pipes and tubes followed by finish flat products at 0.10 MnT and stainless steel products at 0.04 MnT. As India’s steel exports to U.S. stand to be quite low, the impact of U.S’s import tariffs on Indian steel market is expected to be quite limited.
Larger indirect impact expected on Indian steel sector
Although the direct impact of U.S. import tariffs on Indian steel industry will be limited, the indirect impact of the same is anticipated to be larger. This is because the countries like Korea, Japan, and Vietnam which have significant contribution in U.S’s steel imports, will start looking for different markets outside U.S. in order to get their excess production consumed. Since India has a free trade agreement with Japan, Korea and other ASEAN countries. This may lead to the surplus quantity of around 5.00 MnT that may be required to find new markets.
Indian Pig iron manufacturers may benefit
With the imposition of import tariffs by U.S., the demand for in-house steel in the country is likely to get a boost and that the domestic steel manufacturers will be required to increase their production in order to meet the demand that was earlier met by imported material. Subsequently the country’s requirement for key raw materials (pig iron and scrap) used for steel manufacturing will also increase in the U.S.
U.S. has imported about 5.04 MnT of pig iron with majority share coming from Russia followed by Ukraine. While India’s percentage contribution in U.S.’s total pig iron imports stands to be low at 1.4%, the Indian pig iron exporters have a chance to increase their shipments to U.S. in the coming years ahead till the tariff imposition shall remain in place.
U.S. scrap exports may fall; India’s scrap availability may suffer
U.S. tariff restrictions will lead to increased domestic consumption of scrap for steel production via EAF (Electric arc furnace) route. As U.S. is one of the major scrap exporters in the world (with a percentage share of 37% in world’s total scrap exports), the availability of scrap in the international market would decline and that its prices may increase subsequently in the coming months.
India is one of the key scrap importers in the world. According to customs data, in 2017 India imported 4.57 MnT of ferrous scrap and highest imports were made from U.S. at 0.74 MnT (16%). Now with the likelihood of increased scrap consumption in U.S., the availability of scrap in India from U.S. may get adversely affected.
Indian Steel Makers Support US move?
India’s Steel Minister, Shri Chaudhary Birender Singh has called Trump’s government’s move a positive step towards safeguarding the U.S. steel industry. Whereas the chairman of JSW Group, Sajjan Jindal has asked for ‘US-like’ tough trade barriers to protect not only the steel industry but also the entire manufacturing sector of the country. India’s Commerce & Industry Minister, Shri. Suresh Prabhu has mentioned in his tweet that even India should replicate the measures like Trump government and that steel should be exempted from all the FTAs (Free Trade Agreement) signed.
India’s engineering exports body EEPC (Engineering Export Promotion Council) has raised its concern on the imposition of import restriction by U.S. government as these tariffs are likely to impact India’s shipments of engineering items to the United States. As reported, EEPC Chairman Ravi Sehgal said that the protectionist measures taken by countries like the US would provoke other regions such as Europe and China into taking retaliatory steps, which would further dent exports from India.
Leave a Reply