The US tariffs on the steel sector are unlikely to impact India significantly, as only 2 percent of the country’s total finished steel exports in the first nine months of this fiscal year were to the US, according to Crisil Intelligence.

The US has decided to impose a flat 25 percent tariff on steel imports from March 12, replacing the previous system of multiple lesser levies. This change is expected to have a three-fold impact.

“Firstly, it will reduce the exports of its trade partners as local production increases. However, India is unlikely to be impacted materially because only 2 percent of its total finished steel exports in the first nine months of this fiscal year were to the US,” said Sehul Bhatt, Director-Research at Crisil Intelligence.

Secondly, the tariffs may lead to the diversion of exporter inventory to other importing nations at competitive prices, especially in an environment of increasing global competition. This could further lower steel prices in India, which are already trending at four-year lows.

“This means the Indian government may need to intervene with safeguard duties to support domestic capacities. The timing and magnitude of such action will be critical,” Bhatt noted.

Thirdly, the increased production by US mills will likely reduce the availability of steel scrap for exports. This is because about 70 percent of the steel industry in the US uses the electric arc furnace process, which relies on scrap to produce steel. Currently, India sources around 14-15 percent of its scrap requirements from the US.

Key import sources for the US include Canada, Brazil, Mexico, and South Korea. In 2024, the US saw a sharp rise in steel exports from Vietnam, Taiwan, and Brazil.

While the US tariffs may open up a portion of the US market for India’s steel exports, the surplus steel produced by Japan and South Korea may be diverted to the Indian market, according to a recent ICRA report.

-IANS