India recently imposed anti-dumping duty on some steel products. Tapan is trying to figure out if the duties serve a purpose and what is the need for continuous intervention by the government, in a conversation with his friend Lohith.
Tapan: The tariff spillover continues with India imposing an anti-dumping duty on certain steel products. I guess free trade is losing to protectionism. But as you track steel sector, can you explain why this was required.
Lohith: Let me start with a stark fact. India is the world’s second largest steel producer at 150 mtpa. But despite this, India has been a net importer of steel. This is because China manufactures a gigantic 1,000 mtpa of steel a year, six times the second largest. On top of this, China exports 100 mtpa of steel every year and at a steep discount to local products. With such overbearing presence, a normal trade flow will decimate local steel manufacturing in any country which essentially is the reason for trade barriers.
Tapan: They must really like their steel in China. Are they really good at it?
Lohith: Steel manufacturing is simple. Any region will have to work with iron ore and coal to produce steel. This establishes a base line for cost. Yes, scale can lower the cost but only to an extent. Steel production cost is more or less comparable across regions.
But you are making a critical assumption that China profits from steel trade. Forget making a profit, many experts believe that China barely recovers the variable cost from the prices at which it is selling the steel. Against the steel selling price of $500 per tonne, the coal cost of $250-280 per tonne, iron ore cost of $100-110 per tonne and the power, logistics, processing, labour, interest and other costs, it is difficult to imagine a profit.
China’s central planning is willing to take a hit in one sector – steel, to support several other sectors. Infrastructure, automobiles and energy transition benefit from the cheap steel and sectors associated with steel: transportation, mining, power generation. The employment and economic multiplier benefit makes it loss-win deal.
Tapan: Sounds sneaky, loss in steel to support other industries. But why shouldn’t other countries do the same at China’s expense. Benefit the same industries domestically, but at the cost of losses in China’s steel industry.
Lohith: The straight answer: steel industry is central to any economy and must be protected. To safeguard domestic steel capacity US, Europe, Japan and every other consumer including India do resort to such barriers and at the moment these are at the highest.
But if you read between the lines, countries do analyse the cost benefit and react. In India for instance, you can pick steel industry comments requesting for duties in 2010s or in 2020s or more recently. But the safeguard duties and antidumping duties are imposed by the government not immediately but only after careful consideration. In the meanwhile, the same set of domestic companies, construction, infra and autos, continue to benefit.
Tapan: Who says you can’t have a cake and eat it too? Stepping in only before the (steel) mould breaks to balance the whole of the domestic industry.
Lohith: Yes, but there is only so much manoeuvring that is possible. Trade barriers cannot be isolated decisions. Imagine US puts up a trade barrier to Chinese steel. This will divert all the excess to Europe, India or Japan. These countries will then be forced to put up a trade barrier or face a deluge of cheap imports.
Tapan: The only way out seems to be a cut in Chinese steel capacity.
Lohith: That is hope against hope. But for Indian steel manufacturers, this signals an arrest of steel price decline, a support level at which the government is willing to intervene and a confidence to continue with the current expansion programmes. Overall, Indian steel industry will welcome this move even if they are expecting more of such actions.
Published on December 27, 2025
