Steel safeguard duties set price floor, but demand is key: S&P

India has extended safeguard duties on steel imports, which S&P Global Ratings says will set a price floor. However, the report highlights that a sustained recovery in domestic demand is crucial for higher prices and industry credit metrics.

India's extension of safeguard duties on select steel products will set a pricing floor for imports, but its effectiveness in supporting higher prices ultimately hinges on a recovery in domestic demand, according to a report by S&P Global Ratings.

In S&P's view, a sustained improvement in industry credit metrics will require demand-led price support. "While the extension of safeguard duties raises the import parity price on steel, a sustained improvement in demand will be crucial to support domestic pricing," said S&P Global Ratings credit analyst Anshuman Bharati in the report titled "India Steel Brief: Duties Raise The Floor, Demand Sets The Ceiling."

Government Extends Safeguard Duties

The Indian government has extended safeguard duties on steel imports until April 2028, starting at 12 per cent and tapering to 11 per cent. The government notification said the decision followed an investigation by the Director General Trade Remedies (DGTR), which found that imports of specific steel products had increased in a "recent, sudden, sharp and significant" manner, causing and threatening serious injury to domestic producers.

Market Dynamics and Price Fluctuations

This move by the central government followed a period of significant pricing pressure through much of the fourth quarter of 2025. Benchmark hot rolled coil prices corrected by more than 10 per cent to Rs 46,000 per ton in early December 2025 from a high of Rs 52,500 per ton in May 2025.

Significant capacity additions by steel companies over the past few quarters created a temporary surplus, the S&P report noted. This coincided with an extended monsoon, which slowed construction activity and hurt steel demand in India. The prices have since partially recovered to Rs 50,000 per ton, primarily driven by restocking demand as the market anticipates firmer pricing through the peak January-March period.

Future Outlook and Impact of Duties

S&P assumes average prices of Rs 48,000 per ton over the next 12 to 18 months. "We project domestic steel consumption will expand at 8 per cent annually over the next three to four years, significantly higher than the 2-3 per cent global average," said Bharati. "Nonetheless, high global and domestic steel supply has been a drag on steel prices."

The safeguard duty is expected to keep a sturdy floor under India's domestic steel prices. Without the duty, domestic prices are close to the import parity level of about Rs 50,800 per ton. With the levy in place, import parity increases by about Rs 6,500 per ton--protecting domestic mills from a surge in imports should local prices rise further.

If current prices are maintained at Rs 50,000 per ton, this could increase the aggregate earnings of select steel companies representing 50 per cent of India's total steel output by about 10 per cent. (ANI)

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