The United States' decision to impose a 25 per cent tariff on steel and aluminum imports is expected to create challenges for Indian metal producers, potentially affecting export revenue and market dynamics, industry analysts said.

Though India is not a leading supplier of primary metals to the U.S., the global redistribution of steel and aluminum due to the tariffs could influence pricing and competition in the Indian market, experts noted. The move may result in surplus metal from nations such as China and South Korea being diverted to India, increasing supply pressures and weakening pricing power for domestic steel mills.

Moody’s Ratings Assistant Vice President Hui Ting Sim stated that the new U.S. tariffs would intensify competition and worsen overcapacity in key global steel markets, further complicating export opportunities for Indian producers. “Increased steel imports into India over the last year have already suppressed prices and impacted earnings for domestic manufacturers,” Sim said.

Steelmakers exporting specialized products, such as stainless steel and flat steel, could also see reduced shipments to the U.S. The reimposition of tariffs follows a period in which approximately 300,000 metric tons of Indian steel received tariff waivers in 2024.

While primary metal producers in India brace for indirect repercussions, Indian companies operating in the U.S. stand to benefit. Hindalco Industries’ U.S.-based subsidiary, Novelis, and JSW Steel’s American facilities could gain from the tariff structure.

Novelis, which has a manufacturing presence in Bay Minette, Alabama, supplies aluminum for beverage packaging, automotive, and aerospace industries in North and South America. Analysts expect that rising U.S. aluminum prices due to the tariffs could lead to an increase in the Mid-West premium, boosting Novelis’ profit margins on recycled aluminum.

“The higher Mid-West premium will support Novelis through improved recycling margins,” said Satyadeep Jain, lead metals analyst at Ambit Capital. “Although some demand reduction in the U.S. is possible, shipments of can sheets, autobody sheets, and specialty aluminum products remain unaffected.”

Hindalco’s financials are increasingly reliant on Novelis, which contributed over 60 per cent of the company’s revenue in the quarter ending September 30, 2024. JSW Steel’s U.S. operations, with facilities in Texas and Ohio, could also benefit as higher tariffs make domestic production more competitive.

European steel exporters, which depend on the North American market amid sluggish domestic demand, may face the most direct impact of the U.S. policy shift. The European Union steel industry’s struggle with excess supply could indirectly affect Indian exporters as well, experts warned.

“European steel producers focusing on the U.S. will feel the strongest impact. India has the potential to export up to 10 million metric tons of specialized steel to the U.S., and while the direct effect is limited, the broader global steel surplus will have a secondary impact,” said Niladri B, a metals and mining expert at Grant Thornton Bharat. He added that India's primary aluminum exports to markets such as Mexico and the Netherlands, totaling around 600,000 metric tons annually, could come under pricing stress.

While Novelis and JSW Steel could gain from the tariff structure, companies reliant on U.S. stainless steel exports may encounter setbacks. Jindal Stainless, a major supplier of specialized steel to global firms, including Procter & Gamble’s Gillette division, might face cost increases and logistical challenges.

A Reuters report indicated that Procter & Gamble had previously stockpiled stainless steel from Jindal Stainless in response to earlier U.S. tariffs under the Trump administration. The company had incurred over $1 billion in additional costs due to tariff measures during that period, according to filings with the U.S. Department of Commerce.

The latest tariff move is expected to add strain to trade relations between India and the U.S., particularly in the metals sector. While India’s direct steel exports to the U.S. remain limited, the broader global ramifications could reshape competitive dynamics in key markets. Analysts suggest that Indian exporters must navigate shifting trade policies, currency fluctuations, and evolving demand trends to mitigate risks.

The long-term impact of these tariffs will depend on global metal supply chains, diplomatic negotiations, and potential countermeasures by affected countries. Indian steelmakers will need to adapt to the changing trade landscape as U.S. import restrictions reshape global steel and aluminum markets.