US Metal Tariffs 2024 Impact on Indian Steel Firms & Novelis’ Potential Gains

How US Tariffs on Steel & Aluminium Could Impact Indian Metal Firms

The United States’ decision to impose a 25% tariff on all steel and aluminium imports may have far-reaching consequences for Indian steel manufacturers, even though India is not a major exporter of these metals to the US. Analysts warn that excess steel production from China and South Korea could be redirected toward India, intensifying competition and pressuring domestic steel prices.

Highlights:

• US imposes 25% tariffs on all steel and aluminium imports
• Indian steel industry could face pricing pressure due to China & South Korea’s oversupply
• Hindalco’s Novelis & JSW Steel’s US operations may benefit from higher tariffs
• Jindal Stainless could be affected due to high export volumes to the US

Indian Steel Makers Face Growing Challenges

According to Moody’s Ratings, the new US steel tariffs will worsen oversupply in global steel markets, forcing excess production into India.

“The US tariffs will increase competition and exacerbate oversupply at other steel-producing markets. Indian steel producers will face increased challenges in exporting their products. Over the past 12 months, high steel imports into India have already dampened prices and earnings of steel producers,”
said Hui Ting Sim, Assistant Vice President, Moody’s Ratings.

India’s steel imports have surged, leading to declining profit margins for domestic manufacturers. If global steelmakers are unable to export to the US, they could dump their surplus supply into India, further weakening steel prices.

Hindalco’s Novelis & JSW Steel Poised to Benefit

While Indian metal producers may suffer, firms with existing operations in the US could see gains.

• Hindalco Industries’ subsidiary Novelis—which has a large facility in Alabama—is a key supplier for beverage packaging, automotive, and aerospace industries in the US.
• JSW Steel, which operates a 1.5 million tonne per annum (MTPA) steel plant in Texas and Ohio, may also benefit from reduced competition in the US market.

“We may see an increase in the Mid-West premium, making aluminium more expensive in the US. This would benefit Novelis through higher recycling margins,”
said Satyadeep Jain, Lead Metals Analyst at Ambit Capital.

Hindalco’s dependency on Novelis is growing, with Novelis contributing over 60% of Hindalco’s revenue in the quarter ending September 2024.

Indirect Impact: European Steelmakers to Suffer the Most

The biggest losers from the US tariffs may not be Indian companies but European steelmakers, who rely heavily on US exports to manage supply gluts.

“EU steel exporters focusing on the US market will suffer the most. India exports about 10 million tonnes of special-grade and stainless steel to the US, and 300,000 tonnes of Indian steel were tariff-exempt in 2024. Tariff reimposition will impact this segment.”
said Niladri B, Partner & Metals Industry Leader at Grant Thornton Bharat.

Concerns Over Aluminium Exports

India exports 600,000 tonnes of aluminium annually to markets like Mexico and the Netherlands, which may also face indirect pressure due to supply shifts in the global metals market.

Jindal Stainless May See Decline in US Exports

While Hindalco and JSW Steel stand to gain, Jindal Stainless could face setbacks due to its high exposure to the US market.

• Jindal Stainless has a strategic partnership with Procter & Gamble (P&G) to supply stainless steel for Gillette razors in the US.
• P&G had previously stockpiled Jindal Stainless products to mitigate costs during Trump’s earlier tariff hikes.
• If tariffs increase production costs for US-based manufacturers, demand for Indian stainless steel could decline.

Conclusion: US Tariffs Could Reshape India’s Steel & Aluminium Exports

The US metal tariffs of 2024 will create both challenges and opportunities for Indian steel and aluminium firms. While domestic producers may struggle with price pressure due to China and South Korea’s surplus dumping, companies like Hindalco’s Novelis and JSW Steel’s US operations could see gains.

With another round of tariff revisions expected later this year, the global metal industry remains in flux, making it crucial for Indian firms to adapt their strategies in response to shifting trade dynamics.