Indian steelmakers are grappling with inventory build-up despite higher consumption as imports continue to flood the domestic market, prompting the steel ministry to flag the issue and monitor the situation closely, said people familiar with the matter.

"The high steel inventory is a matter of concern," said a senior official, who did not wish to be identified.

According to industry estimates, domestic producers have been sitting on steel inventory worth INR 89,000 crore since the start of 2024-25.

The stocks have remained largely unchanged at around 14 million tonnes (mt) at September end, up 13.01% from 13.67 mt a year ago, showed the data compiled by the steel ministry.

The inventory levels have persisted despite a 13.65% year-on-year increase in local steel consumption between April and September to 72.82 mt.

Sector watchers say increasing imports and falling exports have significantly contributed to the inventory levels, which have risen after the Covid-19 pandemic.

"Higher imports and lower exports have resulted in net import of about 2.4 mt in the first half of the current fiscal. So, while the consumption rate is high, higher net import led to similar inventory levels," said Sumit Jhunjhunwala, sector head - corporate ratings, ICRA Limited.

Steel imports in the first six months of 2024-25 increased 41% to 4.7 mt from 3.3 mt a year ago. Exports slumped 35.9% to 2.3 mt from 3.6 mt during this period.

"Chinese exports have significantly increased and resulted in higher imports. So, India needs to monitor its import level to see any meaningful reduction in inventory levels," Jhunjhunwala said.

Another reason for inventory piling up in the first half of this fiscal was excess rain received during the monsoon impacting steel demand from the construction industry.