Mandate Mayhem: Ministry’s Missive Mystifies Metal Markets

India’s steel trade landscape has undergone a tectonic shift following a significant policy intervention by the Ministry of Steel. In a newly amended Quality Control Order, the ministry has made it mandatory that all steel input materials, including hot-rolled slabs for HR imports, must also be certified by the Bureau of Indian Standards. Until now, only the final steel product, primarily hot-rolled coils, required such approval.

This seemingly procedural amendment has sent tremors across the industry, as global steel mills now face a steep bureaucratic climb to obtain certification for upstream production inputs. While this may appear as an innocuous regulatory revision, its implications are far-reaching, effectively insulating Indian shores from a deluge of cheaper steel imports.

Diplomatic Disarray: FTA Nations Face Formality Fiasco

The fallout has been most pronounced among Free Trade Agreement countries such as South Korea, Japan, and members of ASEAN, whose producers had previously enjoyed unimpeded market access owing to duty-free or reduced-tariff structures. These nations have been among the top exporters of HRC to India.

Many of their mills had already acquired BIS certification for HRC. However, the revised rules now require them to also certify their input materials, primarily HR slabs, often produced in a different facility or even another country. This additional layer of regulation has caught many off guard, leaving FTA exporters scrambling to reassess compliance pathways.

Commercial Conundrum: China’s Charter Curtailed by Compliance Clause

Chinese producers, already under a cloud for anti-dumping allegations, are reeling from the move. Several Chinese mills had painstakingly acquired BIS certification for HRC, and were a dominant force in India’s import scene. But the fresh requirement for input slab certification means that even these mills are now sidelined, at least temporarily.

With buyers unsure how to navigate the updated rules, Chinese HRC offers have evaporated. Theoretical prices for Chinese HRC are currently pegged at $470 per metric ton CFR India, about INR 42,000 per matric ton landed including port expenses, as compared to INR 51,000 per matric ton landed. Market participants confirm that no new offers from China have emerged this week, underscoring the widespread uncertainty.

Fiscal Flux: Fragmented Figures Fuel Fears Among Importers

The disruption has led to a state of paralysis among importers, who are in “panic mode” as they await clarity from the Ministry of Steel & BIS authorities. As a result, fresh bookings have halted.

Only one Russian-origin HRC offer was heard last week, quoted at around $455 per metric ton CFR Mumbai. The last confirmed deal in the Indian market involved South Korean-origin HRC, which was booked at $520 per metric ton CFR Chennai for July–August shipment. In the meantime, Indian buyers are sitting on the sidelines, fearful of falling foul of the new rules or incurring compliance costs.

Steel traders report that many shipments are now in limbo, with customs clearance expected to become more cumbersome in the absence of BIS documentation for input slabs. Some suggest that importers may even cancel previously booked contracts, depending on how strictly the notification is enforced at ports.

Import Inflection: Ingress Interdicted by Increased Internal Capacity

India’s appetite for imported HRC has been growing in recent years. In FY25, HRC imports were estimated at 3.9 million metric tons, translating to roughly 0.3 million metric tons per month. This marked a 15% year-on-year increase, with HR imports accounting for 41% of total finished steel inflows into the country.

However, India’s own steel production landscape has also changed dramatically. Over the past 3–4 years, flat steel capacity has expanded significantly. Numerous greenfield projects & brownfield expansions have been commissioned or are nearing completion. Major producers like JSW Steel, NMDC & Tata Steel have ramped up output capabilities, reducing dependency on imports.

While the amended QCO may initially support domestic mill realizations, it also increases the risk of oversupply if domestic demand remains sluggish, turning the protectionist win into a long-term overcapacity trap.

Demand Doldrums: Domestic Downturn Dampens Optimism

Demand-side dynamics are equally concerning. The automotive sector, traditionally a key consumer of HRC, continues to underperform. Sales for FY25 for 2 wheeers stood at 19.6 million units, which is still 12% below the sector’s peak in FY18 (2017–18). Demand for small cars and two-wheelers, both critical for HRC consumption, remains tepid.

Other sectors like construction and infrastructure, though relatively stable, may not be robust enough to absorb the rising supply from domestic mills. Without a corresponding uptick in demand, domestic producers may soon face pressure to discount prices or build up unsold inventory, eroding the very gains they hoped to achieve by blocking imports.

Export Erosion: Eclipsed Edge Exacerbates External Exposure

In previous years, Indian mills had managed to defend domestic pricing by channeling surplus production to export markets. But that edge is rapidly diminishing. Chinese steelmakers have aggressively increased their exports, flooding markets across Asia & the Middle East.

Current Chinese FOB HRC prices range between $400–445 per metric ton, depending on the quality & origin (Tier 1 to Tier 3 mills). This makes Indian exports relatively less competitive, especially when factoring in freight & logistical costs. Indian producers may soon find themselves squeezed both at home and abroad, unless new export markets can be secured or domestic consumption revives.

Protectionist Paradigm: Panacea Or Pyrrhic Pursuit for Producers?

The Indian steel industry’s push to “islandize” itself, creating a self-reliant steel sanctuary, has culminated in this new QCO policy. Flat steel producers have, for now, achieved a rare feat: sealing Indian shores from low-cost imports through regulatory fortification rather than trade tariffs.

Yet, the broader question looms: will this be a panacea or a pyrrhic pursuit? While it may shield Indian HRC prices temporarily, it cannot address core structural issues like tepid demand, increasing competition from Chinese mills, or global market saturation. The policy might eventually backfire if it leads to inflated domestic prices, underutilized capacities, and reduced global competitiveness.

Key Takeaways:

• Indian steel ministry's amended QCO mandates BIS certification for HRC input slabs, halting new offers from China, South Korea & other FTA countries.

• HRC imports rose to 3.9 million metric tons in FY25, accounting for 41% of India’s total finished steel imports.

• Domestic demand remains sluggish, especially from the auto sector, while Chinese export competition continues to grow at $400–445 per metric ton FOB.