Tariffs May Turn India Into Dumping Ground, Indian Steel Association Says

A worker uses a cutting torch in a workshop in a steel and iron market area of New Delhi. (Photographer: Prashanth Vishwanathan/Bloomberg)

The representative body for India's steel companies warned that the U.S. import tariffs will turn “non-mature” markets such as India into a dumping ground for steel products.

According to the Indian Steel Association, a 25 percent import tariff on steel will “inevitably encourage steel-surplus nations to divert their exports to vibrant consumption centres like India”, distorting domestic markets.

The Donald Trump administration last week announced a tariff on steel and aluminium imports in a step towards increased protectionism. “When a country (U.S.) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump tweeted, raising fears of a full-blown trade war.

Most of India's production is used to meet its growing domestic consumption and the country accounts for only 2.7 percent of U.S.' steel imports, Bhaskar Chatterjee, secretary general of the steel association, said in a statement. Besides, India exports to the U.S. is nominal and only aimed at “maintaining a connect with international markets”, he added. On the other hand, countries such as Canada, Japan, South Korea and Russia which are some of the largest suppliers of steel to the U.S., usually produce with the intent to export.

It is important to make a distinction between a “steel non-mature country” like India and other heavy exporters before imposing such a tariff, the statement said.

This adversely dents the growth of a developing country like India whose production and consumption is inward-looking.

Bhaskar Chatterjee, Secretary General, Indian Steel Association

Market veteran and chief executive officer of Avendus Cap Alt Strategies, Andrew Holland agrees. Metal tariffs would lead to dumping of excess products, which could lower global prices, he told BloombergQuint in an interview.

Also Read: U.S. Metal Tariffs' Direct Impact On India

Global research firm Morgan Stanley, however, said that any rerouting of steel exports from other countries to India is unlikely, and strong growth domestic steel demand could absorb any incremental domestic supply.

With safeguard duty (for steel) still in place and domestic steel prices at a discount to global steel prices (on import parity), a potential increase in steel imports into India is unlikely.

Morgan Stanley Report

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