The Directorate General of Trade Remedies (DGTR) has recommended a 12% safeguard duty on selected steel products for 200 days to prevent “serious injury” to the domestic steel industry caused by rising imports.

• This recommendation has been submitted for approval to the Department of Revenue under the Ministry of Finance.
• The move comes in response to a surge in steel imports into India, driven by trade diversion resulting from US tariffs on steel and protectionist measures by the European Union.
• The DGTR cited that countries like the EU, Canada, and the UK have already implemented 129 trade remedy measures against steel imports, increasing the risk for India.
• Steel manufacturers support the duty as a means of protecting domestic production, while MSME manufacturers argue it could raise steel prices and create a monopoly in the sector.

About Trade Diversion 

• Trade diversion occurs when a country imposes trade barriers, such as tariffs, causing exporters to redirect their goods to alternative markets.
• In the context of US tariffs on steel and aluminum, this means that steel exports initially meant for the US market are now being redirected to India and other nations to bypass the high tariffs.

How Does Trade Diversion Happen?

• US Tariffs on Steel: Recently the US government announced a 25% additional duty on all imported steel products.
  • This new tariff applies to all countries, revoking previous exemptions or trade relaxations.
• Effect on Steel Exporters: Major steel-exporting nations such as China, South Korea, Japan, and Vietnam now face higher costs when exporting steel to the US market.
• Shift in Export Markets and Trade Diversion:
  • To avoid these tariffs, these exporters are looking for alternative markets, leading to increased steel imports into India.
  • As a result, Indian steel industries face heightened competition from foreign steel producers offering lower-priced products.

Key Features of the Safeguard Duty

• Scope of the Duty: The 12% safeguard duty applies to specific categories of steel, including non-alloy and alloy steel flat products.
• Certain steel products are excluded from this duty, such as:
  • Stainless steel
  • Cold-rolled grain-oriented electrical steel
  • Aluminum-coated steel

MSMEs Concerns

• Micro, Small, and Medium Enterprises (MSMEs) fear that the safeguard duty will increase raw material costs, making it harder for them to remain competitive.
• The concern is that domestic steel manufacturers may monopolize the market and raise prices due to reduced import competition.

Recent Trends in Steel Trade and India’s Scenario

• Global Trends: Countries such as the US and the EU have implemented higher tariffs and import restrictions on steel to protect their local industries.
  • This has led to a global redirection of steel exports, with exporters searching for alternative buyers like India.
• India’s Steel Industry: India is among the largest steel producers in the world, with domestic players such as Tata Steel, JSW Steel, and SAIL playing a key role.
  • Rising imports of cheap steel have created pricing pressure on domestic producers.
• Import Surge:
  • India’s steel imports increased by 15% in FY 2024-25 as per data of Ministry of Commerce & Industry
  • Imports from China alone surged by 20% due to trade diversion.