12% Steel Safeguard Duty Offers Interim Relief as Imports Rise, Say Analysts

Government Imposes Temporary Duty as Imports Hit Nine-Year High

In an attempt to stem the rising influx of cheap steel imports and protect domestic manufacturers, the Indian government has imposed a 12% provisional safeguard duty on certain flat-rolled steel products for 200 days starting April 21. The move is designed to counter the redirection of global steel surpluses, especially from China and South Korea, into India, following the imposition of reciprocal tariffs by the United States.

The safeguard duty covers flat-rolled products of non-alloy and specific alloy steels, sectors where Indian producers have been increasingly vulnerable to dumping. However, despite this move, industry analysts caution that the relief is marginal. According to estimates, import parity remains largely intact, with domestic hot-rolled coil (HRC) prices continuing to command a 6% premium even after factoring in the new duty.

Highlights:

• 12% safeguard duty applies to flat-rolled steel imports for 200 days.

• Imports hit a 9-year high at 10.1 million tonnes in FY25.

• Domestic steel prices remain 6% above import parity even post-duty.

• China and South Korea dominate steel exports to India.

Temporary Margin Support Likely for Domestic Steelmakers

While the safeguard duty may limit immediate import pressure and offer temporary margin expansion for steel producers, analysts argue that long-term structural advantages remain elusive. According to Priyanka Poddar of India Ratings and Research, the duty will support profitability in FY26, especially with benign raw material costs, but is unlikely to change the pricing trajectory.

This policy action comes at a time when India has turned into a net importer of steel for the second year in a row, with exports having dropped significantly from 18.51 million tonnes in FY22 to 6.95 million tonnes in FY25. Meanwhile, surging flat-steel imports have added pressure on domestic mills, necessitating urgent policy intervention.

The per-tonne EBITDA for Indian steelmakers is expected to get a lift in the short term due to the safeguard duty. However, some of these gains could be eroded if state governments hike mineral royalty taxes, a possibility already being discussed in policy circles.

Highlights:

• Temporary boost to per-tonne EBITDA expected for steelmakers.

• Steel exports fell over 60% in three years, now at 6.95 million tonnes.

• Domestic mills face dual pressure: imports and possible mineral tax hikes.

• India remains world’s second-largest crude steel producer.

Global Oversupply and Tariffs Weigh on Long-Term Outlook

Despite short-term benefits, several analysts remain cautious on the steel sector’s long-term pricing power. With global steel supply facing a glut due to weak demand and excess capacity, coupled with the impact of US tariff barriers, the risk of downward price pressure is elevated.

Morgan Stanley notes that domestic HRC prices remain significantly higher than imports—an 18% premium before the duty, narrowing only slightly post-levy. This undermines any argument for domestic price hikes purely on the basis of the safeguard duty. According to the brokerage, “the development doesn’t create a case for domestic steel prices to move higher,” and is unlikely to trigger a structural uplift in earnings.

Elara Capital has expressed further concern about global economic headwinds. With slowing GDP growth, persistent oversupply, and the risk of yuan devaluation, the short-term cushion provided by the safeguard duty may be neutralized over the medium term. The brokerage adds that even in the domestic context, subdued private capital expenditure and cash-constrained state government capex are dampening demand revival.

Highlights:

• Morgan Stanley sees limited room for domestic price hikes post-duty.

• HRC prices still at 6% premium even after safeguard duty.

• Global oversupply and weak demand pose risks to pricing power.

• Yuan devaluation, sluggish GDP growth may erode medium-term gains.

Muted Market Reaction Reflects Demand-Side Concerns

The announcement of the safeguard duty had triggered speculative price increases in March, but actual trades soon reverted to lower levels amid tepid demand and cautious buying behavior. According to BigMint, market participants expect mills to initiate price-supportive measures as sluggish sentiment continues to weigh on transaction volumes.

Several mills are already exploring mechanisms such as limited supply release and inventory control to support prices. However, these tactics may provide only short-lived support if broader demand-side fundamentals remain weak.

Industry participants also point to a lack of aggressive infrastructure spending, traditionally a major steel demand driver. With state governments facing fiscal constraints, capex growth has stalled, compounding concerns about demand stagnation despite protectionist policy tools like safeguard duties.

Highlights:

• Steel prices spiked briefly in March but later corrected.

• Market expects mills to adopt price-support tactics.

• Infrastructure-driven demand muted due to state fiscal pressures.

• Recovery dependent on broader economic and capex revival.