Impact of US Steel Tariffs on India Minimal: Crisil Analysis
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Synopsis
According to Crisil Intelligence, the US tariffs on steel are unlikely to materially affect India, as only 2% of finished steel exports were destined for the US. The tariffs may affect pricing and lead to a shift in inventory to other nations, while local production in the US increases.
Key Takeaways
- US tariffs impose a 25 percent levy on steel imports.
- India's steel exports to the US are just 2 percent.
- Shift in inventory may lead to lower steel prices in India.
- Government intervention could be necessary to protect domestic market.
- Increased production in the US may reduce export scrap availability.
New Delhi, Feb 18 (NationPress) The US tariffs on the steel sector are expected to have a minimal impact on India as merely 2 percent of the nation's total finished steel exports during the first nine months of this fiscal year were directed to the US, according to Crisil Intelligence's findings released on Tuesday.
The US decision to impose a flat 25 percent tariff on steel imports starting March 12, as opposed to various lower tariffs previously, will have a three-fold effect.
First, this measure will likely decrease the exports of its trading partners as local production in the US escalates; however, India is not expected to suffer materially due to the aforementioned small percentage of its exports to the US, stated Sehul Bhatt, Director of Research at Crisil Intelligence.
Secondly, there may be a shift in exporter inventory towards other importing countries at competitive prices, especially in an environment of rising global competition.
This shift could further decrease the price of steel in India, which is already at 4-year lows.
This implies that the Indian government might need to intervene with safeguard duties to protect domestic production capacities. The timing and extent of such measures will be vital, Bhatt pointed out.
Thirdly, the increased production by US mills will likely lead to a decline in the availability of steel scrap for export.
As much as 70 percent of the steel industry in the US utilizes the electric arc furnace method, which typically converts scrap into steel.
Currently, India obtains 14-15 percent of its scrap requirements from the US.
The main sources of imports for the US include Canada, Brazil, Mexico, and South Korea. In 2024, the US saw a notable increase in steel exports from Vietnam, Taiwan, and Brazil.
While the US tariffs could potentially create some opportunities for India’s steel exports, the excess steel produced by Japan and South Korea may redirect to the Indian market, as indicated by a recent ICRA report.
