US import tariffs: Indian aluminium producers likely to be more affected than steel producers

Equity markets have seen sharp corrections over the past few months as investors are worried about the impact US trade and economic policies would have on global markets. Recently, US President Donald Trump announced 25 per cent tariffs on imports of steel and aluminium. How will that impact Indian companies? Well, there is good news and not-so-good news.

A key thing to note is India's direct steel exports to the US are relatively low, constituting just about 4 per cent of its total exports in 2024, pointed out Ratings agency CAREEdge. At the same time, steel demand in India remains good, growing around 10-13 per cent over the financial years 2022-2024, it added.

However, there could very well be an indirect impact on the domestic steel industry if, in the wake of the tariffs, countries, which are major steel exporters, divert some of their production to India.

Several Asian countries, such as South Korea, Japan, Taiwan, China, and Vietnam, contributed significantly to steel exports to the US market.
"Weakening demand in major steel-consuming economies has led to an over-supply situation, thereby adding pressure on realisations," pointed out CAREEdge.

Global export prices for hot rolled coil have averaged around $535 per tonne during 2024, down from around $788 per tonne in 2022, it pointed out.

"An increase in import tariff by the US could result in the diversion of surplus production by major Asian steel manufacturing countries to Indian markets, which is likely to keep realisations under check," said CAREEdge.

This is certainly not good news, considering that between the first ten months of the current financial year, realisations of the domestic steel industry had already moderated with growing imports of steel.

In aluminium, its a different situation altogether. Here, India is a major exporter of primary aluminium; in 2024, close to 40 per cent of our domestic aluminium production was exported. Also, according to CAREEdge, India's direct aluminium exports to the US were around 6-8 per cent.

To that extent, the impact of the tariff hike on the export volumes and the realisations for Indian aluminium producers will be higher than that on steel producers, it said.

However, Indian companies do enjoy an advantage.

"India remains one of the lowest-cost aluminium producers globally, mainly on account of the availability of quality bauxite reserves, which improves India’s cost competitiveness in the global market, pointed out CAREEdge.

This can provide greater cushion to domestic aluminium producers to meet the increased competition from any over-supply scenario arising from the imposition of tariffs by the US.