Indian steelmakers are currently contending with a substantial inventory crisis, despite an uptick in local consumption. This paradox has emerged as steel imports surged by 41% in the first half of the fiscal year 2024-25, while exports plummeted by 35.9%. The steel ministry has taken notice, monitoring the situation closely as the excessive stockpile poses significant challenges for the sector.
Industry estimates reveal that domestic producers are sitting on steel inventories valued at approximately ₹89,000 crore, with stock levels remaining largely unchanged at around 14 million tonnes (mt) as of the end of September 2024. This figure reflects a 13.01% increase from the previous year’s inventory of 13.67 mt, highlighting a concerning trend amidst rising consumption. According to the latest data, local steel consumption grew by 13.65% year-on-year from April to September, reaching 72.82 mt. Analysts attribute the rising inventory levels to a combination of increased imports and declining exports. “The net import of about 2.4 mt during the first half of the current fiscal year is a direct consequence of this dynamic,” stated sector head for corporate ratings at ICRA Limited. While consumption appears robust, the surge in imports has effectively neutralised its impact on inventory levels.
The first six months of 2024-25 saw steel imports rise to 4.7 mt, compared to 3.3 mt during the same period last year. Exports, on the other hand, fell to 2.3 mt from 3.6 mt, signalling a significant shift in the balance of trade for the sector. “Increased Chinese exports have played a crucial role in this scenario, and India must closely monitor import levels to see a meaningful reduction in inventory,” head for corporate added. Adding to these challenges, excessive monsoon rainfall has adversely affected demand from the construction industry, further exacerbating the inventory situation. This year, the construction sector has experienced disruptions, leading to reduced steel consumption when demand was anticipated to peak.
The emotional toll on steel manufacturers and workers cannot be understated. Small and medium enterprises within the sector, which are crucial to local economies, find themselves at a crossroads. They face the dual challenge of managing high inventory costs and navigating the uncertain market landscape. Local manufacturer Ravi Kumar voiced concern: “We are caught in a bind. While we want to support the market by producing more, the high inventory makes it hard to commit to future orders.” From a sustainability perspective, this situation underscores the need for a balanced approach to imports and local production. The current reliance on imports threatens not only economic stability but also the environment, as increased transportation contributes to carbon emissions. The steel industry must advocate for sustainable practices, including enhancing local production capabilities to reduce dependency on imports.
