Is it true that Indian steel exports are slated to fall in the coming fiscal FY23?

A recent report by CRISIL has pointed out that India's steel exports may fall by 35% to 40% in FY23. The current steel exports in FY22 stood at 18.3 million tonnes but that is expected to fall to as low as 10-12 million tonnes in FY23. This is on account of export duties, which will compress the exports of steel to the EU region. In fact, the export of 18.3 million tonnes in FY22 was an all-time record. However, the restrictions in the form of higher export duty came to encourage the use of domestically produced steel for domestic purposes.

There were two major announcements. Firstly, government has announced the waiver of customs duty on the import of critical steel inputs like coking coal and ferronickel. However, government wanted to avoid this benefit being exported. Hence, at the same time, it also hiked duty on exports of iron ore to 50% and on other steel intermediates to 15%. This will make exports more expensive and pull it down, as is already evident from EU reducing its share of India imports due to lower price differentials. India had a got a higher quota.

One major reason for robust export of steel in FY22 was the Ukraine war. Russia is a major exporter of steel, coking coal and pig iron but were circumscribed by sanctions. This spiked the prices of a host of commodities including steel, minerals and oil. This spurt in global prices led to higher demand for steel from India due to widening price differentials. This had also offset the 25% tariff on steel imports imposed by the EU. However, with the export duty imposed on steel, that would no longer be an edge for steel producers in India.

Here is why the government did this. The soaring price of steel led to unviable operations in industries like construction, automobiles, heavy machinery and consumer goods. The hike in export duty was aimed at curbing this producer inflation. The duty driven approach will ensure better availability of steel in India and ensure that the benefits of import duty cuts on critical steel inputs will be available to domestic markets rather than to global markets. Steel prices have cooled from Rs77,000 per tonne in April to around Rs62,000 per tonne.