Ranchi, May 21 (PTI) A 28-30 per cent surge in global freight costs amid geopolitical tensions, including the escalating West Asia situation, is emerging as the biggest challenge for India’s steel industry, even as domestic operations and raw material supplies remain largely stable, a senior Tata Steel official said.

The sharp rise in shipping rates, triggered by instability in West Asia and the prolonged Russia-Ukraine conflict, is significantly increasing logistics costs for steelmakers dependent on imported coking coal, he said.

"For steel, the biggest impact is freight. Freight rates have gone up by almost 28-30 per cent... This is the direct impact. First, the Russia-Ukraine war, and now the West Asia situation... This is definitely having a cascading effect on almost all countries," Tata Steel Vice-President (Corporate Services) D B Sundara Ramam told PTI.

Despite global disruptions, the steel industry has so far managed to maintain production levels, though rising freight and logistics costs are becoming a major concern for the movement of raw materials, he said.

Tata Steel imports around 78 per cent of its coking coal requirement, or nearly 12-13 million tonnes per annum, mainly from Australia, while the remaining 22 per cent comes from domestic mines in West Bokaro and Jharia, Ramam said.

He said coal supplies from Australia and Indonesia remain operationally stable, but higher freight charges are pushing up input costs across the sector.

Ramam, who earlier served as vice-president (raw materials) at Tata Steel, said tensions around the Strait of Hormuz have not materially impacted the company’s overall raw material security, as India remains largely self-sufficient in iron ore and imports only limited quantities.

However, recent disruptions in limestone imports from the Gulf region have prompted the company to pivot to alternate sources to ensure continuity of supplies, he said, adding that the situation underlines the need for greater domestic mineral self-reliance.

"The lesson from these disruptions is how to become more self-reliant in minerals such as limestone. We have resources, but technology improvements are needed to make them suitable for steelmaking," he said.

India’s steel industry has remained relatively insulated from global disruptions, due to strong domestic demand and lower dependence on imported finished steel, he said.

Ramam said India became a net steel exporter in the 2025-26 fiscal, with exports exceeding imports by around 5-6 million tonnes.

Domestic steel consumption grew by about 8 per cent during the last fiscal, supported by government infrastructure spending, manufacturing expansion and healthy demand from the automobile sector, the senior company official said.

Domestic consumption of finished steel grew by 7-8 per cent to 164 million tonnes in 2025-26 on the back of increased activity in infrastructure, construction, railways, and manufacturing sectors.

The country's crude steel output grew by over 10.7 per cent to around 168.4 million tonnes during the financial year, reflecting sustained industrial momentum, company officials said.

Tata Steel India achieved production of 23.4 million tonnes in 2025-26, while deliveries stood at 22.5 million tonnes, with operations remaining stable despite global volatility, they said.

The steel major has also reduced dependence on LPG in industrial applications and canteens by shifting to PNG and oxygen-based systems, as part of efforts to lower fuel exposure and support domestic energy balancing measures, Ramam said.

However, he cautioned that while the last fiscal saw only limited operational impact, supply-chain vulnerabilities and export pressures could intensify in 2026-27 if geopolitical tensions and shipping disruptions continue.

Earlier this month, Tata Steel CEO and MD T V Narendran had said 2025-26 was marked by elevated geoeconomic uncertainty, with supply-chain disruptions and tariff-related trade issues impacting global steel markets.

Executive Director and Chief Financial Officer Koushik Chatterjee had also expressed concern that the global business environment has become very challenging with the impact of the West Asia conflict on energy, oil, trade and currency markets.

"We are on alert and actively monitoring performance triggers across geographies, and focusing on operational resilience and cost optimisation," he had said.

The Tata Steel Group, with an annual crude steel capacity of 35 million tonnes per annum, recorded a consolidated turnover of around USD 26 billion in the financial year ending March 31, 2026. PTI NAM MNB RBT

Freight cost surge is straining steelmakers as shipping disruptions raise logistics burdens and expose supply-chain vulnerabilities. Global freight rates have risen sharply amid geopolitical tensions, increasing logistics costs for steelmakers dependent on imported coking coal and other raw materials. Domestic operations and production remain stable, but higher shipping charges are affecting input costs and exposing supply-chain vulnerabilities, especially for imported limestone and other sensitive shipments. The sector is responding by shifting to alternate sources, reducing fuel exposure, and strengthening operational resilience and cost control.