• 7:03 am

The impact of India's adjustment of tariffs on Chinese steel market

  • Tariff Changes and Their Rationale: Discuss why India has adjusted its tariffs on steel imports and exports, providing insights into the global and domestic steel market conditions that prompted the changes.

  • Effect on Steel Prices: Analyze how these tariff adjustments could affect steel prices, both in India and in your country, with potential shifts in demand, supply, and price stability.

  • Competition in the Steel Market: Explore how this move might increase or decrease competition in your country’s steel industry. Will local producers gain an advantage, or will imported steel from India become more competitive?

  • Long-Term Market Implications: Assess the long-term impact on industrial sectors reliant on steel, such as construction, manufacturing, and infrastructure, and how tariff changes could reshape trade relationships.

 

On May 22, the Indian government issued a policy to adjust import and export tariffs for steel raw materials and products. It is reported that the Indian government’s adjustment of tariffs this time is mainly to control the prices of domestic industrial products, reduce import tax rates and increase export tax rates. 

According to the policy notice, the Indian government reduced the import tariffs on coking coal and coke from 2.5% and 5% to 0; and raised the export tariffs on hot-rolled, cold-rolled, and coated sheets with a width of more than 600 mm from 0 to 15%. ; Raise the export tariff of pellets from 0 to 45%; impose a 15% export tariff on iron and steel semi-finished products such as pig iron, stainless steel bar and alloy bars (previously 0).

As a dark horse in the international steel market in the past two years, India has attracted much attention. What impact will this sudden adjustment of tariffs have on my country’s steel market?

From 2017 to 2020, India’s domestic iron ore output did not change much, and it basically remained at 200 million tons to 250 million tons; in 2021, India’s iron ore output reached a high level in the past 20 years, reaching 246 million tons, a year-on-year increase of 246 million tons. 20% increase. 

Judging from the proportion of the country’s iron ore exports to production, it has basically remained at 10% to 15% in the past five or six years. In 2020, due to the impact of the new crown pneumonia epidemic, India’s domestic crude steel consumption has dropped significantly. The country’s iron ore Ore exports, however, have hit record highs in recent years and will return to normal levels in 2021.

It can be seen from the fact that the proportion of India’s iron ore exports to its output has remained basically stable, and the external supply of India’s iron ore has not changed much in recent years. In addition, one of India’s largest iron ore producers, India’s state-owned Mine Development Corporation (NMDC), announced earlier this year that it would restart its Donimalai open pit iron ore mine in Karnataka, India. , and enabled two R9200Liebherr excavators to assist in iron ore mining. 

The Doni Marais open-pit iron mine could increase NMDC’s output by about 7 million tons per year. Under this circumstance, India’s iron ore production in 2022 is expected to continue to record highs.

In contrast, the basic situation of my country’s imports of Indian iron ore. In the first half of 2021, stimulated by high iron ore prices, my country imported 25.83 million tons of Indian iron ore, a year-on-year increase of 29% and a record high. 

However, iron ore prices began to fall in the second half of 2021, and China’s iron ore imports from India shrank, and even in the fourth quarter of 2021, China’s iron ore imports from India fell to 400,000 tons/month. This situation has improved in the first quarter of 2022, but it is still far from the first half of 2021.

According to customs statistics, from January to April 2022, my country imported 5.36 million tons of iron ore from India, down 71% year-on-year, with an average monthly import volume of around 1.3 million tons. Judging from the magnitude of my country’s imports of Indian iron ore, it has been significantly reduced since September 2021. Therefore, the impact of changes in Indian iron ore prices on my country’s iron ore supply has been greatly reduced, and it can even be said that there is no impact.

In addition, from January to April 2021, my country imported a total of 5.36 million tons of Indian iron ore, of which 3.162 million tons were imported pellets, accounting for 59% of the total imports. 

As far as the overall domestic iron ore consumption is concerned, the consumption of pellets in steel mills has dropped significantly. In addition, with the gradual expansion of the output of domestic mines, the short-term domestic pellets will also make up for this reduction to a certain extent.

Therefore, if the unit price of iron ore is at a low level, the adjustment of Indian tariffs will basically have little impact on the unit price of iron ore. If the unit price of iron ore is high, the profit of the mine is still there, but it needs to spit out part of it to the local government, which will not have a big negative impact on the output of the mine in the short term.

There are rumors in the international market that the Indian government’s adjustment of import and export tariffs will have a great impact on India’s steel billet and pig iron exports. In fact, a careful study of relevant data shows that India’s pig iron exports are basically zero. The month has also started to go downhill.

From a pragmatic point of view, the Indian government’s adjustment of import and export tariffs may affect other low-grade iron ore markets in the short term, thereby driving the price difference between high and low-grade iron ore to continue to shrink.