SINGAPORE (S&P Global Ratings) March 5, 2025--Indian mills may face a glut of imported steel as U.S. tariffs reshape global trade flows in the material. Some offset may come from cheaper coking coal, another likely result of shifting trade barriers. S&P Global Ratings believes the downside risks on steel prices are greater than the likely cost benefits on inputs.
"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."
With the U.S. set to impose a 25% tariff on steel imports, effective March 12, 2025, exports to the U.S. are becoming costly, diverting flows to other geographies.
Chart 1
"Korea and Japan may divert more exports toward India," said Mr. Bharati, noting that these two countries accounted for 15% of the 26 million tons of steel the U.S. imported in 2024.
India already gets 40% of its steel imports from these two countries and has free-trade agreements with both. At the same time, domestic steel prices in India are also under pressure from cheaper imports from China.
"The higher-import threat comes while India is ramping up about 15 million tons of newly built steel capacity that was added during 2024," said Mr. Bharati. "Sluggish steel prices could delay the full utilization of this capacity and may hinder expansion."
Chart 2
Our downside scenario for a price correction is now harsher, at Indian rupee (INR) 3,000 per ton. Under this scenario, the consolidated ratio of debt-to-EBITDA for large Indian steel companies could rise to 3.5x in fiscal year 2026 (year ending March 31). That is significantly higher than our base case of 2.4x.
The Indian steel companies have requested government intervention to protect the domestic steel industry.
"The government previously employed trade protection measures to check the influx of cheaper imports," said Mr. Bharati. "Should similar measures be implemented again, they could insulate domestic producers from international price volatility and safeguard their earnings."
CHEAPER COAL COULD PROVIDE TEMPORARY RELIEF
China's recent tariff hike on U.S. coking coal could offer some relief to Indian steel producers. The 18% tariff will likely create a surplus of U.S.-origin coking coal in the seaborne market. This could lower the prices and improve the profitability of Indian steelmakers, which are the largest buyers of seaborne coking coal.
China imported 10.7 million tons of U.S.-origin coking coal in 2024, representing about 9% of its total coking coal imports. A substantial portion of this volume could now find its way to India, potentially putting downward pressure on prices for Australian-origin cargoes.
On March 5, 2025, S&P Global Ratings revised its coking coal price assumptions for rest of 2025 to US$200 per ton from US$220 per ton (see "S&P Global Ratings Metal Price Assumptions: Holding Firm Through First Waves Of Tariffs," published on RatingsDirect on March 5, 2025). Our price assumptions are also lower than the average price of US$240 per ton in 2024.
A US$20 per ton reduction in coking coal prices from our base case could increase the average EBITDA per ton for Indian steel mills by more than INR1,000, all else equal. Such an improvement could partially offset the hit from falling steel prices caused by a potential increase in imports.
EDITOR'S NOTE
S&P Global Ratings believes there is a high degree of unpredictability around policy implementation by the U.S. administration and possible responses--specifically with regard to tariffs--and the potential effect on economies, supply chains, and credit conditions around the world. As a result, our baseline forecasts carry a significant amount of uncertainty. As situations evolve, we will gauge the macro and credit materiality of potential and actual policy shifts and reassess our guidance accordingly (see our research here: spglobal.com/ratings).
Related Research
- S&P Global Ratings Metal Price Assumptions: Holding Firm Through First Waves Of Tariffs, March 5, 2025
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| Primary Credit Analyst: | Anshuman Bharati, Singapore +65 6216 1000; anshuman.bharati@spglobal.com |
| Secondary Contact: | Minh Hoang, Singapore + 65 6216 1130; minh.hoang@spglobal.com |
| Media Contacts: | Richard J Noonan, Melbourne + 61 3 9631 2152; richard.noonan@spglobal.com |
| Ning Ma, Hong Kong (852) 2912-3029; ning.ma@spglobal.com |
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