Japan's Call for Exemption from India's Proposed Steel Import Tax
In the wake of India’s investigation into implementing a safeguard duty to curtail rising steel imports, Japan has appealed for exemption from this temporary tax, arguing that the move would severely disrupt the supply of high-grade steel products essential to various sectors in India. Japan’s appeal highlights the significance of high-performance steel, which cannot be sufficiently produced within India or meets the quality and quantity needs of Indian consumers.
India’s Safeguard Duty Investigation
India, the world’s second-largest producer of crude steel, initiated an inquiry in December 2024 to assess the need for imposing a temporary safeguard duty on steel imports. The purpose of this duty would be to curb the influx of steel, particularly from countries like China, which have contributed to overcapacity in the steel market. Minister of Steel H. D. Kumaraswamy confirmed the investigation and its relevance in protecting India’s domestic steel industry.
The Request for Exemption from Japan
During the third India-Japan Steel Dialogue held in New Delhi, a Japanese delegation, including government and industry officials, presented a formal request for Japan to be exempted from the proposed safeguard duties. According to the presentation, Japanese steel exports play an essential role in meeting India’s demand for high-performance alloys, especially in sectors that require specialized steel products.
The documents outlined that these high-grade products cannot be manufactured domestically in India, or even if produced, the quantity and quality do not match the requirements of Indian consumers. The Japanese delegation further emphasized that imposing tariffs on these imports would hurt the Indian economy, particularly industries relying on Japan’s high-quality steel products.
Impact of the Safeguard Duty on India’s Steel Industry
India’s overall steel imports surged to a six-year high in the first nine months of the fiscal year beginning April 2024, with steel shipments from Japan reaching a seven-year high. In fact, Japanese steel accounted for nearly 25% of India’s total finished steel imports during the period. The country’s reliance on foreign steel, particularly from China, South Korea, and Japan, has prompted Indian authorities to consider the safeguard duty, fearing that cheaper imports could further harm local steel mills, which are already struggling to compete with the influx of low-cost steel.
India’s smaller steel mills, in particular, have been feeling the pressure as they scale back operations and contemplate job cuts. A significant portion of India’s steel imports, comprising 79% of all finished steel imports during the April-December period, came from China, South Korea, and Japan.
Ongoing Diplomatic Efforts
Japan’s efforts to prevent the safeguard duty from impacting its steel exports have been ongoing. Before the presentation in February, Japan’s embassy in New Delhi had sent letters to India’s trade and steel ministries urging them not to impose the temporary tax on Japanese steel imports. The Japan Iron and Steel Federation, which represents major players like Nippon Steel and JFE Steel Corp, also sent a letter in December 2024 and January 2025, advocating for Japan’s exemption from the safeguard duty.
Challenges Posed by Overcapacity in China and ASEAN
The core of India’s investigation into the safeguard duty stems from the overcapacity in steel production in China and the ASEAN region, which has led to an influx of cheap steel into India. The Indian government’s consideration of country-specific curbs is seen as a potential solution to address the disproportionate impact of foreign steel on local mills. However, Japan’s request seeks to distinguish itself from these global trade imbalances, arguing that its steel exports provide critical support to Indian industry.
The Broader Implications for Global Steel Trade
India’s proposed safeguard duties are part of a wider trend of protectionism in global steel trade, with many countries taking steps to shield their domestic steel industries from external competition. The debate between India and Japan illustrates the delicate balance between protecting domestic industries and maintaining international trade relationships. Japan’s steel producers are particularly vulnerable, as the Indian market is a significant destination for their high-performance steel products, and any disruption could have adverse consequences for both nations’ industries.
As discussions continue, the outcome of India’s safeguard duty investigation could shape the future of steel trade between India and Japan, as well as influence the global steel market.
