Indian manufacturers to benefit from rising Chinese steel prices

The recent rise in Chinese steel prices could benefit Indian steelmakers by shifting the import parity premium of domestic hot-rolled coil (HRC) prices from about 7-8% in September 2024 to a current import parity discount of approximately 3%.

A report by Axis Securities reveals that the Chinese hot-rolled coil (HRC) steel prices have surged in September 2024, benefiting Indian steel companies. HRC refers to steel rolled into coils at high temperatures and is commonly used in industries such as construction, automotive, and manufacturing.

The report stated, “The increase in Chinese HRC prices has turned the import parity premium of the domestic HRC prices vs. Chinese prices from approx. 7-8 per cent in Sep’24 into an import parity discount of approx. 3 per cent at present.”

Previously, Indian HRC prices were about 7-8% higher than those in China, but this gap has now shifted to a discount of approximately 3%. This pricing shift is anticipated to assist Indian HRC producers in stabilizing domestic prices and enhancing their competitiveness against Chinese imports. Indian steelmakers, who have been under pressure from declining prices in recent months, could find some relief from this development.

In response to complaints from domestic steel companies, India has initiated an anti-dumping investigation into Cold Rolled Non-Oriented Electrical Steel imports from China. 

Companies like POSCO Maharashtra Steel and CSCI Steel Corporation India, according to the Directorate General of Foreign Trade (DGFT), have alleged that these imports are being sold at dumped prices, causing “material injury” to the domestic industry. They have requested anti-dumping duties to protect local manufacturers from unfair competition.

The impact of China’s economic stimulus on steel spreads, which measure the margin between steel prices and raw material costs, may be limited. This is primarily due to rising prices of essential raw materials like iron ore and coal. While these price increases may provide short-term benefits, the rising costs of raw materials could strain profit margins.