Policy Update
Mohd Asif
Introduction and Background
China is both the world’s largest producer and consumer of steel. Because of the enormous size of the Chinese steel industry, any change in domestic production can have an outsized impact on the steel industries in other countries. Both President Trump and Biden have accused China of dumping cheap steel on the global market, and Biden raised tariffs on Chinese steel and aluminum in 2024. Combined with a weakening domestic economy, those restrictions have dampened the outlook of the Chinese steel industry.
Understanding China’s Steel Industry
China produces over a billion tons of steel each year, giving it nearly 10 times the steelmaking capacity of the United States. While much of China’s steel production is domestically consumed, they are also the world’s largest exporter of steel. In 2023, China exported 94.5 million tons of steel, far exceeding steel exports in the previous three years.
Because of this export volume, China has been accused of dumping cheap steel on the global market to beat out competitors. In 2024, President Biden raised tariffs on Chinese steel and aluminum to 25%, Following his re-election later that year, President-Elect Trump pledged to raise tariffs even further, to as much as 60% on goods from China, with an across-the-board tariff of 10% to 20% for goods from other countries.
These barriers caused China’s steel industry to decline in 2024, with cutbacks due to slumping domestic demand and anti-dumping measures by a number of nations. An increase in tariffs could cause further constriction in Chinese industry, not only to direct exports, but also indirect exports such as shipping containers. At the same time, China continues to account for over half the world’s production. Steel is one of the most innovative and flexible alloys, which can be customized for many requirements. Variants of steel are used in housing, transportation, industrial, automobile infrastructure and utilities sectors, making it one of the world’s most versatile materials, one that’s easily reused and recycled.
China, India, Japan, the United States, and Russia were the top five steel-producing nations in 2023, with China the leader with over a billion tons. The next closest country, India, produced only 140 million tons. Japan produced 87 million tons, the United States 80 million, and Russia 75 million tons.8 While China and Japan are the top exporters of steel, the United States and Germany are the leaders for imports because of their economies’ high consumption rates.
Given such a dominant market share, along with the large amounts of steel used across different sectors of its economy, any slowdown in the Chinese economy will have a major impact on the global steel industry. The 2024 slowdown in the Chinese economy has left the country with an oversupply of steel. Not only did this hurt the profitability of Chinese steel manufacturers, but the excess steel was then sold on the world market, undercutting the steel industry in other countries.
Chinese Contribution to the Global Economy
China is the world’s largest exporter, and it’s second largest importer. In 2023, China imported products worth $2.56 trillion, and exported products worth $3.51 trillion.18 Combined, these figures make China a leading source of demand as well as global supply.By producing more steel that the rest of the world combined and exporting huge amounts of it, China is the single biggest influence on global steel markets. The rest of the world remains concerned about dumping from China due to excess supply, and many nations are taking action to protect their domestic steel producers.
Objective
This decision follows an in-depth review conducted by the Ministry of Steel in early October, which revealed growing concerns about the sector’s exposure to trade diversions on a global scale. During the first five months of the current financial year, India became a net importer of steel. According to official data, the country imported 3.45 million tonnes (mt) of steel, compared to 1.92 mt of exports, the report said.The increase in imports is driven by global producers seeking new markets due to weak demand and high tariffs imposed by the US and the EU. These conditions have heightened the risk of steel dumping into India, according to the report.
Strengthening quality control measures
The government’s tightening of quality checks is seen as a way to curb the flood of steel imports. Currently, various grades of steel are permitted for import, subject to a no-objection certificate (NOC) from the steel ministry, despite existing quality control orders (QCOs). However, officials, as mentioned by the report, have said that going forward, NOCs will only be issued for steel grades not manufactured locally. This move is expected to address the import of steel that doesn’t comply with the Bureau of Indian Standards (BIS).
The steel ministry has issued norms for 1,279 steel grades under 151 QCOs, but as many as 1,127 grades have been allowed to enter the country with NOCs. Officials have indicated that this loophole will soon be addressed, with the expansion of QCOs to cover a wider range of steel grades, India imports approximately 400,000 tonnes of non-BIS-compliant steel annually, valued at around Rs 4,200 crore. In a bid to curb the entry of substandard steel, the government had already mandated in October last year that any steel import not approved by BIS must first receive clearance from the steel ministry.
Consultations with Stakeholders
The Ministry of Steel has decided to issue permits only for steel grades that are not manufactured locally, officials have confirmed. This move comes as part of the government’s efforts to tighten quality controls and curb the influx of substandard imports. Currently, despite the implementation of quality control orders (QCOs), the import of 1,127 steel grades has been permitted through No-Objection Certificates (NOCs) issued by the steel ministry. These grades fall under the broader norms covering 1,279 steel categories across 151 QCOs. Officials have indicated that this loophole will soon be addressed as the scope of QCOs is being expanded to include more steel grades.
India imports approximately 400,000 tonnes of non-BIS-compliant steel annually, valued at around ₹4,200 crore. To tackle this issue, the government made it mandatory in October last year for all non-BIS-compliant steel imports to receive prior approval from the Ministry of Steel. Manufacturers and traders are now required to obtain BIS certification for any steel products covered under the QCOs before they can be sold in India.
In light of rising imports from China and Southeast Asia, the ministry has conducted consultations with stakeholders to address growing concerns. This includes apprehensions about trade diversions caused by global tariff policies. For instance, the United States and Canada have imposed a 25% safeguard duty to protect their steel industries, while the European Union has applied a similar 25% duty on imports exceeding a set quota. Countries such as Turkey, Indonesia, Malaysia, Vietnam, and Japan have also implemented protective measures to safeguard their domestic steel markets.
Comparative Analysis with a Global Context
The global approach to protect steel industries offers valuable context for India’s recent policy measures. Many nations have introduced similar frameworks to shield their domestic sectors from unfair trade practices, dumping, and low-quality imports. For example, both the United States and Canada have implemented a 25% safeguard duty on steel imports to support local manufacturers. These tariffs have not only slowed the influx of cheap steel but also allowed domestic industries to recover and regain competitiveness.
In a comparable effort, the European Union introduced quantitative quotas, imposing a 25% duty on steel imports exceeding prescribed limits. This approach strikes a balance between safeguarding local industries and ensuring an adequate supply of steel. Countries like Turkey, Indonesia, Malaysia, Vietnam, and Japan have employed antidumping measures and stricter quality standards to combat the adverse effects of global steel dumping. Indonesia, for instance, has tightened import regulations to promote the use of domestically produced steel in key infrastructure projects. Likewise, Japan has introduced rigorous quality monitoring systems to uphold domestic standards, significantly reducing the entry of substandard imported steel.
These examples highlight the critical need to protect domestic industries while adhering to global trade norms. While such policies offer short-term relief to steel producers, they must be paired with long-term strategies to build domestic capacity, foster innovation, and sustain global competitiveness. India’s decision to broaden the scope of Quality Control Orders (QCOs) and enforce Bureau of Indian Standards (BIS) compliance reflects a similar strategy, aimed at safeguarding its steel industry while ensuring that trade practices remain transparent and standards uncompromised.
Way Forward
To ensure the long-term growth and resilience of India’s steel sector, a multifaceted approach is required. First, the focus should be on enhancing domestic manufacturing capabilities by investing in technological advancements, such as energy-efficient production methods and smart manufacturing techniques. Establishing dedicated research and development hubs can help develop specialized steel grades for high-demand industries like renewable energy, defense, and electric vehicles.
Public-private partnerships can also play a significant role in setting up state-of-the-art steel clusters, boosting production and creating employment opportunities. Expanding the quality control framework is another crucial step. Wider coverage of steel grades under the Bureau of Indian Standards (BIS) norms is necessary to ensure uniform quality across sectors. Incorporating digital tools like blockchain for import monitoring can enhance transparency and prevent non-compliant products from entering the market.
Streamlining the BIS approval process for domestic manufacturers will further encourage compliance without unnecessary delays. India should also aim to strengthen its position in global steel markets by increasing exports. Strategic market access to regions like Africa, Latin America, and Southeast Asia will help diversify export destinations. Providing incentives, such as tax breaks and subsidized credit for exporters, can make Indian steel more competitive internationally. At the same time, branding Indian steel as reliable and high-quality will help capture premium global markets.
A critical component of the way forward is aligning the industry with sustainability goals. Decarbonizing steel production through hydrogen-based processes and increasing the use of electric arc furnaces can significantly reduce carbon emissions. Promoting recycling and reusing steel can contribute to a circular economy, reducing waste and dependency on raw materials. Additionally, integrating renewable energy sources into steelmaking processes can minimize the sector’s reliance on fossil fuels.
Addressing trade dynamics is equally important. Regular antidumping investigations and timely implementation of corrective measures will safeguard the domestic market from unfair practices. At the same time, negotiating trade agreements can help ensure better access for Indian steel in global markets. However, a balanced approach is needed to allow the import of essential high-grade steel not yet manufactured locally, supporting industries like aerospace and electronics.
Developing a skilled workforce is another vital aspect of the sector’s growth. Collaborations between academia and the steel industry can facilitate specialized training programs, while government-backed upskilling initiatives will ensure the workforce remains competitive in a rapidly evolving global market. These efforts will not only enhance productivity but also create substantial employment opportunities.
Policy stability and industry support are critical for fostering investor confidence and ensuring consistent growth. Regular consultations with stakeholders can address emerging challenges, while a clear long-term roadmap with defined targets will guide the industry toward sustainable expansion. Financial support, such as low-interest loans and subsidies, can further encourage innovation and capacity building. By adopting a holistic and forward-looking approach, India can transform its steel industry into a global powerhouse while ensuring its contribution to economic growth and national development.
References
About the contributor– MOHD ASIF is a research intern at IMPRI. He Studied peace and conflict studies from Jamia Millia Islamia.
Acknowledgment– The author would like to thank Dr. Arjun Kumar, Aasthaba Jadeja, who helped throughout this article and reviewed the same.
Read more at IMPRI:
