COMMENT-As steel prices head south, India may like to thank China


New Delhi would without doubt be cheering Beijing’s crackdown on polluting steel mills towards the end of this week.

The single action by China’s government has sent skyrocketing iron-ore prices crashing, which will translate into lower prices of the most important steel-making ingredient for Indian steel mills as well.

New Delhi has been so troubled by soaring prices of steel that Transport Minister Nitin Gadkari publicly warned domestic steel mills late last year that he would discuss the issue with Prime Minister Narendra Modi.

That warning was followed by an investigation by the country’s competition regulator, the Competition Commission of India, against possible cartelization as prices of steel had risen by around 55% in the past one year.

In the annual budget in early February, the Indian government cut the import duty on intermediate inputs for steel making—semi-flat and non-alloy steel—to 7.5% from 12.5% to cool down prices. Soon afterwards, JSW Steel, one of India’s largest steel-makers, cut prices by Rs 1,000/ton in the first week of March, but year-on-year prices are still more than 40% higher.

It is in this backdrop that China’s anti-pollution move against steelmakers becomes significant. On Friday, benchmark 62% iron ore fines imported into Northern China (CFR Qingdao) were down 4.25% from the previous trade at $165.53 a ton.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange has slumped by 6% this week to $163.11 a ton. The price crash followed a clampdown in the top steel-making city of Tangshan, which dampened expectations about a post-Lunar New Year demand boost for iron ore in the world’s top steel producer.

Even though India is the second-largest steel producer, its steel production is only about a sixth that of China’s over 1,000 metric tons. Prices of iron-ore traded on the Dalian Commodity Exchange are a global benchmark for all nations including India.

International prices of iron-ore had topped $170/ton until early this year on a China-driven buying frenzy as the world’s No. 2 economy recovered from the pandemic. Expectations now are that Indian steel prices would cool by at least 15%-20% if this week’s iron-ore price slide in China sustains.

There are indications that China may opt for more electric arc driven steel production that is dependent on steel scrap rather than iron-ore for feedstock. If that materialises, it should be good for India as well, because New Delhi has recently outlined a policy to boost vehicle scrappage as well as improve handling capacity at Alang, the world’s largest ship-breaking yard.

In the coming weeks and months, it should mean higher production of scrap, which India could either utilise for its domestic steel mills or ship them to its eastern neighbour.

Biman Mukherji is a columnist and consulting editor at He has worked for international news organisations such as Reuters, The Wall Street Journal as well as for newspapers like The Times of India. He can be reached at

Leave a Reply

Your email address will not be published. Required fields are marked *