India's annual consumption is approaching 100 million tons and there are prospects for further growth thanks to Prime Minister Narendra Modi's efforts to develop the country's infrastructure.
Three years ago, the government introduced measures such as minimum supply prices, protective taxes and anti-dumping duties to stem the flow of cheap imports from overseas, mostly from China. Government efforts and cuts in steel production in China have helped reduce imports in the past couple of years, but new circumstances have emerged.
India will remain a net steel importer for at least the next two years as high-quality products from South Korea and Japan arrive free of charge and due to concerns about increased supplies from China.
India's imports totaled 7.8 million tonnes in the year ended March 31, making the country a net importer and will likely remain at that level this fiscal year, predicts Rohit Sadaka, director of India Ratings and Research Ltd. It could increase if India joins the proposed Regional Comprehensive Economic Partnership, or RCEP, which opens the door to cheaper imports from China.
India, being one of the leading consumer countries, is a ready market for its steel, as it is a growing market, he said. The RCEP agreement is becoming a big threat to Indian players because the local steel industry will not be able to compete with China and its huge surplus.
RCEP, a proposed 16-member free trade agreement between all 10 Southeast Asian countries and six other countries - China, Japan, South Korea, India, Australia and New Zealand - will soon be signed. The final 26th round of trade agreement negotiations is expected to conclude on Wednesday.
According to Bhaskar Chatterjee, secretary general of the Indian Steel Association, any RCEP concession to China would open the floodgates for Chinese steel imports. Existing Comprehensive Economic Partnership agreements with Korea and Japan are also to be revised.
Currently, South Korea, Japan and some Southeast Asian countries can sell to India at zero import tariffs under free trade agreements. Shipments from South Korea have more than doubled since 2010 to 3 million tons, making it the top supplier of steel products to India.
