India’s import orders of 36,000-wheel sets worth $16 million for the flagship Vande Bharat trains were supposed to come from a firm in Ukraine, one of the world’s largest low-cost suppliers of such equipment. But the Ukraine-Russia conflict has put the order in limbo.
This is just one example of how the war in eastern Europe is affecting India. There is a host of raw materials critical for the domestic steel industry, which has high import dependency. All these segments have become the latest casualty of the Ukraine-Russia conflict that has had a double-pronged effect: acute supply chain disruptions and a steep rise in input prices.
Domestic steelmakers have been forced to raise the prices of products such as hot-rolled coils (HRCs) and TMT bars. Integrated steel players are selling TMT bars at Rs 65,000-68,000 a tonne, up from Rs 58,000-60,000 in the pre-conflict period. Similarly, a tonne of HRC now costs more than Rs 73,500 from Rs 62,000-65,000 earlier.
With hardly any uptick in demand, most steel players have stuck with earlier prices this month too; usually these companies give a discount as costs come down, to offload inventory and to free up working capital. This was seen last month also, says the PHD Chamber of Commerce and Industry (PHDCCI). Some steel companies are offering discounts in certain cases. But it is inadequate as steel has too big a role to play in a developing economy like India, and the price increase is biting all sections of industries hard. HRCs, for instance, are used in a variety of industries, such as automotive, consumer durables, shipbuilding and agriculture equipment. TMT bars are used in construction.
India’s dependence problem
India cannot sidestep the price rise as Russia and Ukraine are the 5th and 12th largest steelmakers in the world, respectively, cumulatively accounting for around 10% of the global steel trade, says rating agency ICRA. Around 45% of the steel production from Russia and around 75% from Ukraine are exported. Russia is also the third largest global producer of nickel, a key raw material used in stainless steel production. Both the countries are also leading global exporters of iron ore pellets. While Russia currently has about 4% share in global steel production, Ukraine is the world's 13th largest producer of steel and the fifth largest exporter of iron ore by volume.
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