India may lose second largest stainless steel producer spot to Indonesia

Steel Insights Bureau

Indonesia may overtake India as the second largest stainless-steel producer in the world in 2021, as per the latest melt shop projections presented in the International Stainless Steel Forum’s (ISSF) Annual Conference last week.

Indonesia, which presently ranks fourth in global stainless steel production, will overtake Japan and India with a total production of 4.2 million ton (mt), a rise of 75 percent over last year, by the end of the current calendar year.

President, ISSDA, KK Pahuja said, “On one hand, stainless steel capacity of 5.5 mt is ready in Indonesia. On the other hand, the Chinese government has withdrawn export tax rebate in May 2021, which will restrict the export of stainless steel from China. As a result, exports from China may come down, while exports from the same Chinese companies in Indonesia will rise significantly. This has serious implications for India as we estimate that import intensity from Indonesia will nearly double as trade remedial measures like Countervailing Duty has been withdrawn since the announcement in the Union Budget.”

Chinese companies have been setting up large capacities in Indonesia, exploiting multiple benefits like raw material proximity and local incentives. Since the capacity of over 5.5 mt set up in Indonesia is nearly 25 times the local demand of about 0.2 mt, it is evident that the production is entirely targeted at export markets. The production in Indonesia has been stable at about 2.2- 2.4 mt during the last three years, even as capacity enhancement was in progress.

Globally, China is the largest stainless steel producer in the world with a production of about 30 mt, which is about 60 percent of the global production in 2020.

While the global stainless steel production declined by 2.5 percent in 2020 due to the impact of the pandemic, Chinese production rose by 2.5 percent, further cementing its dominant position.

Indian stainless steel market is the second-fastest-growing market after China and has been a victim of large-scale dumping of stainless steel flat products.

“Chinese government has withdrawn export tax rebate in May, which will restrict export of stainless steel from China. As a result, exports from China may come down, while exports from the same companies in Indonesia will rise significantly. This has serious implications for India.” KK Pahuja, President, ISSDA

In the pre-Covid period of 2019-20, as much as 24 percent of the market was captured by imports, half of which came from Indonesia.

Indonesian stainless steel firms have, therefore, been facing trade actions for dumping and non-WTO compliant subsidies from across the globe, including China.