Indian steelmakers face increased uncertainty as U.S. tariffs reshape global trade: S&P

Indian steelmakers are bracing for a potential supply glut as U.S. tariffs on steel imports take effect, reshaping global trade flows and increasing competitive pressure in the domestic market.

While a decline in coking coal prices may provide some relief, S&P Global Ratings warns that the downside risks to steel prices outweigh the cost benefits on raw materials.

"India's steelmakers are caught up in rising geopolitical and trade tensions, and that's creating more uncertainty in their outlooks," said S&P Global Ratings credit analyst Anshuman Bharati. "Under our new downside scenarios, leverage would be 45% higher than our base case."

The U.S. is set to impose a 25% tariff on steel imports starting March 12, 2025. This move is expected to divert steel shipments from countries such as Korea and Japan—both major suppliers to the U.S.—toward alternative markets, including India. With these two countries already accounting for 40% of India’s steel imports under existing free-trade agreements, domestic producers could face additional price pressures.

Domestic steel under pressure

India’s steel industry is already experiencing the effects of increased imports, particularly from China, which has been supplying lower-cost steel to the Indian market. Additionally, Indian steelmakers are in the process of ramping up 15 million tons of newly built capacity added in 2024. Weak pricing conditions, however, could hinder the full utilization of this capacity and delay expansion plans.

S&P Global Ratings has revised its downside scenario, forecasting a sharper price correction of INR 3,000 per ton. Under this scenario, the consolidated debt-to-EBITDA ratio for large Indian steel companies could rise to 3.5x in fiscal year 2026, significantly higher than the base case of 2.4x.

Amid these challenges, Indian steelmakers are urging government intervention to shield domestic producers from the threat of cheap imports.

"The government previously employed trade protection measures to check the influx of cheaper imports," Bharati noted. "Should similar measures be implemented again, they could insulate domestic producers from international price volatility and safeguard their earnings."

Cheaper coking coal offers temporary relief

One silver lining for Indian steelmakers comes from China’s recent tariff hike on U.S. coking coal, which is expected to disrupt supply chains and increase the availability of U.S.-origin coking coal in global markets. With China importing 10.7 million tons of U.S. coking coal in 2024—around 9% of its total imports—some of this surplus could be redirected to India, the world’s largest buyer of seaborne coking coal.

S&P Global Ratings ahs revised its coking coal price assumptions for the remainder of the year from $220 per ton to $200 per ton, significantly lower than the 2024 average of $240 per ton.

A $20 per ton reduction in coking coal prices could boost Indian steel mills’ EBITDA per ton by more than INR 1,000, providing a partial offset to the anticipated decline in steel prices. However, the overall outlook remains uncertain, with industry players closely monitoring government policies and global market developments.