India’s steel sector is expected to witness limited direct repercussions from the recent tariff hike by the United States, while the aluminium industry may face a more pronounced impact, according to a report published by CareEdge Ratings titled ‘US Import Tariff Hike on Steel & Aluminium: Impact Analysis on Indian Corporates’.
The report highlights that India’s steel exports to the US constitute only around 4% of its total exports in 2024, minimizing the direct impact of the tariff hike. However, the sector may face indirect headwinds if major steel-exporting nations, such as China and Japan, redirect their surplus production to India.
Global steel consumption is projected to decline for the second consecutive year in 2024, driven by weakening demand in major economies like the US, Japan, and Europe. China, which produces nearly half of the world’s steel, continues to face declining domestic consumption, leading to an export surge estimated at 90-95 million tonnes in 2024, up from 65 million tonnes in 2022.
This export surplus is likely to create an oversupply situation, putting downward pressure on domestic steel prices. Global steel prices for Hot Rolled Coil have already dropped from $788 per tonne in 2022 to $535 per tonne in 2024, with January 2025 prices dipping further to $481 per tonne. Despite this, domestic demand remains robust, growing by 10-13% annually over the past three fiscal years.
India’s aluminium producers, who export about 40% of the country’s total aluminium output, are expected to feel a greater impact. The US accounts for 6-8% of these exports, making the tariff hike more significant for the sector compared to steel. However, India’s cost advantage, backed by abundant high-quality bauxite reserves, could help mitigate some of the adverse effects.
“Amid a subdued global environment, growth in Indian steel demand is expected to continue at a CAGR of around 8% over the next 2-3 years, primarily driven by sustained momentum in end-user sectors such as infrastructure and construction,” said Hitesh Avachat, Associate Director, CareEdge Ratings.
Avachat warned that the influx of cheaper steel imports, resulting from the US tariff-driven redirection of surplus production, may keep domestic steel margins under pressure. Meanwhile, aluminium manufacturers could face stiffer competition but are likely to retain a competitive edge due to their cost-efficient production capabilities.
India’s construction boom and infrastructure development are expected to sustain domestic steel demand despite the tariff-induced challenges. However, the trajectory of global trade patterns following the US tariff revisions will remain a critical factor for both sectors in the near term.