The concern is that Indian producers may find it difficult to match the lower prices in export markets. Prospects for domestic sales are also dimming as many projects have failed to take off.

 

Steel imports grew 2.4% in May, the first expansion since March 2016, according to recent provisional government data.

 

Steel imports ballooned until early last year as producers in China flooded the Indian market with cheaper products, hammering prices to a six-year low and triggering losses at domestic producers such as Tata Steel, the flagship of conglomerate Tata Group. Following an outcry by lobby groups and companies, the government intervened mid last year to impose several curbs on cheap imports.

 

Indian companies have also benefited from higher prices for steel over the past year due to capacity cuts in China as well as anti-dumping measures adopted by many countries.

 

In the fiscal year ended March, India's imports fell more than 36% year-on-year turning the South Asian nation into a net steel exporter for the first time in more than three years. During this period, Tata Steel reported a three-fold jump in operating profit amid strong growth in volume and prices. By comparison, the company reported losses for the previous two years.

 

Now, China, the world's largest producer and consumer of steel, is back to cutting prices, according to reports, driven by fears of a credit squeeze and a slowdown in domestic manufacturing activity.

 

The price of hot-rolled steel, which accounts for 74% of India's exports, has fallen "significantly" since the start of this year, lending support to the argument that exporting steel is becoming more difficult with falling global prices, Mumbai-based brokerage Emkay Global said in a report.

 

India's steel exports are increasingly vulnerable to Chinese competition, especially in countries such as Vietnam and Malaysia, which are located close to Chinese ports, Emkay Global said.

 

Meanwhile, domestic sales of steel grew just 1% last month, the slowest growth in May in three years, data from India's steel ministry showed.