Discuss the implications of global steel excess capacity for India's steel sector and its decarbonisation goals.

Structural excess capacity is production capacity that stays far above demand because subsidies and other non-market policies keep it running. The OECD projects that global steel excess capacity will reach 745 million tonnes by 2028 [1]. For India, this glut is a threat to trade and also slows its move to green steel.

Implications for India's steel sector

• Price and margin pressure: In 2024, the median Chinese steel firm received 15 times more subsidy (relative to its assets) than producers elsewhere [1]. Dumped exports pull down prices and profits for Indian mills.
• Circumvention: After anti-dumping and countervailing actions, Chinese steel has been re-routed through ASEAN economies [2]. This weakens duties aimed at a single country, which is why India, like several other countries, raised tariffs on basic steel products [2].
• Producer–user trade-off: Protective duties shield steelmakers, but they raise input costs for steel users such as the automobile, engineering and construction industries.
• Capacity targets at risk: The National Steel Policy 2017 targets 300 MT capacity and 255 MT production by 2030-31 [3]. Depressed prices can delay the investment needed to get there.
• Export ambitions: The PM's call for 'zero imports' and 25 MT of exports [4] runs into saturated markets. India must show that its capacity is built for domestic demand and is not structural excess, or its own exports will face trade remedies abroad.

Implications for decarbonisation

• Investment squeeze: Overcapacity lowers prices, squeezes margins and raises borrowing costs. This limits the internal finance available for low-emission technology [5].
• Weaker green-steel demand: Cheap conventional steel widens the price premium of green steel and delays investment decisions [5]. This weakens India's Green Steel Taxonomy [6], which is meant to build a market for low-emission steel.
• Risk of "green overcapacity": Subsidised low-emission capacity in non-market economies could create a new generation of excess capacity [5].

Way forward

• The DGTR should run anti-circumvention probes that trace the real origin of steel, rather than relying on blanket duties.
• India should back the GFSEC framework for joint action against non-market policies [2].
• Government should adopt green public procurement for infrastructure, which would create assured demand for green steel.

Global excess capacity is therefore both a market shock and a climate risk for India. Rules-based trade remedies, international cooperation on subsidies and demand-led capacity growth can protect the domestic industry while keeping India on track for low-emission steel, in line with SDG 9 and its Net Zero 2070 commitment.