The Indian steel sector is experiencing a significant uplift in domestic prices, directly attributable to the finance ministry’s imposition of a safeguard duty on steel imports. This strategic policy intervention, announced on December 30, 2025, has swiftly recalibrated market dynamics, providing a much-needed buffer for local producers who had been contending with a challenging environment of subdued prices and burgeoning imports. Within a mere week of the duty’s enactment, steelmakers initiated price increases across a spectrum of critical products, signaling a potential return to healthier margins and an improved bargaining position in the global market.
These price adjustments, observed in early January, followed an initial round of hikes in late December 2025. Specifically, prices for hot-rolled coil (HRC) and cold-rolled coil (CRC) saw an increase of 2-4% in early January, building on a 1.5-3% rise in the preceding weeks. Similarly, rebar prices, crucial for the construction sector, climbed by nearly 3-6% in early January, subsequent to an approximate 4% hike in late December. These movements, tracked by commodities market intelligence firm Big Mint, are poised to bolster the financial health of domestic steel manufacturers, many of whom are in the midst of ambitious capacity expansion projects. The preceding three months had seen a significant squeeze on margins due to unfavorable pricing conditions, making this turnaround a critical development for the industry’s profitability.
The safeguard duty, a temporary trade barrier designed to protect domestic industries from sudden surges in imports, is set to be levied for a period of three years. It targets most grades of flat steel products, with a tiered structure: 12% for the first year, tapering slightly to 11.5% in the second year, and 11% in the third. This measure marks a re-establishment of protection that had lapsed earlier; an interim order imposing a similar duty had been notified in April but expired on November 7, leaving the domestic market exposed to competitive import pressures for a period. The renewed duty underscores the government’s commitment to shielding its strategic steel sector.
The necessity for such a protective measure became starkly evident in November, when benchmark HRC prices plummeted to ₹47,100 per tonne, marking a 10-month low. Concurrently, rebar prices hit a five-year low, settling at ₹47,000 per tonne. This sharp decline was primarily attributed to a confluence of weak domestic demand and a global oversupply situation, which saw international steel flooding the local market at highly competitive rates. HRC, a foundational material, is extensively utilized in the automotive and home appliance industries, while rebars are indispensable for construction and infrastructure development. The slump in their prices reflected broader economic pressures and the intense competition from foreign suppliers.
Several factors have converged to empower domestic producers to implement these price increases. According to Niladri N Bhattacharjee, Partner and Metals and Mining Industry Leader at Grant Thornton Bharat, the December safeguard duty, compounded by a weakening rupee, has effectively raised the landed cost of steel imports from major exporting nations like China and Japan. This creates a more level playing field for local manufacturers. He notes that "supported by strong domestic demand, these factors have allowed steelmakers to push through price hikes. While prices remain well below FY22 levels, the move signals an improvement in steelmakers’ bargaining power." Bhattacharjee also anticipates that "the price hike might also improve the profitability of the steelmaker marginally in Q4 compared to earlier quarters when prices hit multi-year low."
Dhruv Goel, CEO of Big Mint, echoes this sentiment, highlighting that "production cuts by smaller steelmakers helped restore balance between demand and supply, while the imposition of a three-year safeguard duty gave producers room to raise prices, as domestic steel was trading at a discount to the landed cost of imports from countries such as Japan and China." He adds that these price adjustments will "help improve profitability of the mills." Furthermore, robust export bookings, buoyed by the weaker rupee, alongside improved order acceptance and seasonal demand during the January-March period, have alleviated selling pressure on mills. This confluence of factors is expected to sustain higher prices, at least through the current fiscal quarter.
The cost of critical inputs has also played a significant role in justifying the recent price escalations. Imported coking coal, a primary raw material for steel production, has seen its global prices rise. This, coupled with the depreciation of the rupee against major currencies, has made its acquisition considerably more expensive for Indian mills, directly pushing up production costs. Analysts at ICICI Securities, in a report dated December 31, project that with the safeguard duty now in effect, domestic steel prices could potentially trade at a premium of at least 10% to international prices for the next two and a half years, fundamentally reshaping the competitive landscape for imports.
Despite the immediate positive trajectory, experts maintain a cautious outlook regarding the long-term sustainability and magnitude of these price increases. Bhattacharjee cautions that while "the increase in domestic price so far appears to be sustainable with more headroom for increase," any significant gains might be constrained. He points to "growth in domestic capacity and capacity utilization" as potential factors that could restrict price growth to levels lower than the highs observed in FY22. Goel shares a similar perspective, suggesting that further substantial increases might encounter market resistance. While prices are expected to remain firm in the immediate term, the specter of oversupply could emerge in the latter half of 2026 as substantial new capacities become operational.
India’s steel sector is currently undergoing a massive expansion phase, driven by anticipated domestic demand and a push for self-reliance. Jindal Steel, for instance, commissioned a 3 million tonnes per annum (mtpa) plant in September 2025, with another expected to come online by the end of FY26. Major players like JSW Steel and Tata Steel Ltd are also on track to achieve full ramp-up of their respective 5 mtpa facilities by the close of FY26. The cumulative impact of these significant capacity additions could introduce a considerable surplus into the domestic market. While demand continues to grow steadily at an estimated 7-8% annually, the sheer volume of new production could outpace consumption, potentially forcing producers to reduce their capacity utilization rates to prevent prices from collapsing.
The recent trade data underscores the dynamic nature of India’s steel market. For the first eight months of FY26, India maintained its position as a net importer of finished steel, according to a steel ministry report. Domestic production during this period reached 109.726 million tonnes. Finished steel imports, while still exceeding exports, saw a substantial decline of 36.3%, totaling 4.19 million tonnes. Concurrently, India’s finished steel exports demonstrated robust growth, rising by 32.6% to reach 4.18 million tonnes. Domestic consumption also expanded by 7.3% to 105.04 million tonnes, reflecting underlying economic vitality. This complex interplay of rising domestic production, fluctuating trade balances, and expanding consumption highlights the delicate equilibrium the safeguard duty aims to maintain.
In essence, the imposition of the safeguard duty has provided a critical lifeline to the Indian steel industry, stabilizing prices and offering a much-needed boost to profitability. This policy intervention, combined with a depreciating rupee, strong domestic demand, and strategic production adjustments, has created a favorable environment for manufacturers to recover from recent market lows. However, the path ahead is not without its challenges. The industry’s ambitious capacity expansion plans, while indicative of long-term confidence and growth aspirations, introduce the risk of oversupply in the medium term. Navigating this delicate balance between protectionist measures, aggressive capacity growth, and sustainable demand will be crucial for India’s steel sector as it strives to solidify its position as a global industrial powerhouse.
