India's ministry of steel has issued an order stating raw materials used in imported finished steel products should meet Indian quality standards.
This is likely to restrict imports, resulting in shortages of specialty steel products used by the automotive industry and other consumers, industry participants said.
The order, issued on 13 June, will now require semi-finished products such as slab, billets and ingots to comply with Indian standards, even if the finished steel product already has a Bureau of Indian Standard (BIS) certification. If an overseas supplier has a BIS permit for IS 2062 grade hot-rolled coil, it will also need a similar certification for IS 14650-grade slab. For downstream products such as hot-dip galvanised steel, the input materials would constitute hot-rolled and cold-rolled sheets and strips, which would also need BIS certification, along with semi-finished products.
Earlier exporters only needed BIS compliance for the final steel product and not the input material. The original quality control order covered 151 steel products.
Steel consumers concerned
A provisional 12pc safeguard duty implemented from 21 April has slowed imports of certain flat steel products.
The new quality control rule, referred to by some industry participants as an additional "barrier" for imports, is applicable to imports with a bill of lading on or after 16 June. It has stoked concerns among micro, small and medium enterprises (MSMEs) that consume overseas steel not made in India, market participants said.
The order "has triggered fears of massive losses and plant closures among MSMEs that rely on imported semi-finished steel," according to a report by think-tank the Global Trade Research Initiative (GTRI). "Many have already paid for shipments now deemed non-compliant," the report said.
The automotive industry is likely to face production hurdles. Japan has been supplying a lot of specialty steel, which is not manufactured in India, to the Indian automotive industry, sources said. An automotive end-user said they were in talks with the government and declined to comment on the new order.
"Steel users across India are shocked," an international steel trader said. In certain cases such as cold-rolled non-oriented steel, a type of electrical steel used in motors, the raw materials such as cold-rolled full hard steel (CRFH) or hot-rolled coil (HRC) may have BIS licence but inputs used to make CRFH or HRC may not meet Indian standards, the trader added.
There is already a shortfall of certain speciality steel grades in India. Only about 12pc of the required 400,000t of cold-rolled grain-oriented steel (CRGO) was produced domestically in April 2023-March 2024, according to GTRI. The remaining volumes were imported from overseas suppliers such as China, Japan, Russia, and South Korea. India launched a new production-linked incentive scheme for speciality steel products this year, with less criteria for investment than the previous version.
The new steel input quality rule is clearly in line with the government's "Make in India" initiative, a Mumbai-based trader said.
It will now be difficult to get imports purchased in recent weeks by steel consumers, another Mumbai-based trading company said, adding that market conditions are tilting in favor of domestic producers. The new order is also expected to weigh on imports of plate from South Korean producers which do not have a BIS for certain input materials, the trader said.
