Priyanka Tiwari
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According to Fitch Ratings, Indian steel prices will face considerable pressure in the upcoming fiscal year. Local steel mills are expected to struggle against the influx of cheaper imports from China and the rising risks from aggressive tariff policies.
Fitch downgraded its headroom for ratings upgrades for India’s top steelmakers by market cap, notably JSW Steel (rated “BB” with a stable outlook) and Tata Steel (rated “BBB-” with a negative outlook).
Impact of Chinese Steel Exports on Local Mills
China, the world's largest steel producer, has been facing challenges in generating profits due to a prolonged property downturn. This has led to a surge in steel exports, especially to countries like India. Local steel mills in India have been dealing with the increasing influx of discounted steel, with imports from China, South Korea, and Japan reaching record highs in the first 10 months of the ongoing fiscal year. As a result, prices for steel have fallen to their lowest levels in more than three years, as of August last year.
Risks from Aggressive U.S. Tariff Policies
In addition to the growing competition from foreign steel producers, the imposition of U.S. President Donald Trump’s 25% tariffs on steel and aluminium imports, effective from March 12, has further complicated the situation. These tariffs have led to retaliation from major trading partners, which could result in redirection of steel exports into India, potentially putting further pressure on domestic steel prices.
While the tariffs are expected to have a minimal direct impact on Indian steelmakers, steel imports from countries like Japan and South Korea (which account for 15% of total U.S. steel imports) could increase, driving up competition in the Indian market.
Outlook for JSW Steel and Tata Steel
Despite these challenges, Fitch expects that JSW Steel and Tata Steel will see improvements in their margins in the upcoming fiscal year, thanks to higher domestic demand, lower raw material costs, and China’s stimulus measures, which may limit steel imports into India. However, the agency notes that their margins will likely remain below average, posing a risk to their ratings.
For Tata Steel, there are additional risks related to the restructuring of its European operations and mining taxes imposed by Indian states.
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