Material Insights · Understanding the Material World

Machinery and equipment and Steel

Machinery relies heavily on steel, from tractor chassis to bearings and motor laminations, and took about 16% of the world's steel in 2019, so steel prices and India's steel import duties feed straight into machinery makers' costs and margins.

Machinery and equipment (industry) and Steel (commodity): 3 relationships.

How they are linked

1. Main structural and component material

Physical flow · Strong · Steel to machinery and equipment

Steel gives machines their strength, stiffness and wear resistance, and special grades do specific jobs: bearing steel for rolling parts, electrical steel for motor laminations, and castings and forgings for engine parts such as crankshafts; the site finds 8 enterprise types in machinery that depend on steel, rating it 4 of 5 for bearing, motor and machine-tool makers.

  • about 16% mechanical equipment's share of world steel use, 2019
  • 8 machinery enterprise types that depend on steel
  • 4 of 5 highest criticality, for bearing, motor and machine-tool makers

Mechanical equipment was the second largest steel-using sector in 2019 after buildings and infrastructure, which took about 52%, and ahead of automotive at about 12%. The site rates steel highest, 4 of 5, where special grades are needed, for bearings, motor laminations and machine-tool beds, and lowest, 2 of 5, for tractor chassis and castings, where common grades are used.

Enterprise types that depend on it:

  • Bearing, gear, hydraulic and seal makers: bearing steel (criticality 4 of 5)
  • Motor, drive, CNC and automation-control makers: electrical steel laminations (criticality 4 of 5)
  • Machine-tool and industrial-robot builders: machine beds (criticality 4 of 5)
  • Foundries, forging shops and special-steel mills: structures and parts (criticality 3 of 5)
  • Diesel engine and powertrain makers: crankshafts and blocks (criticality 3 of 5)
  • Construction and mining equipment makers: booms and chassis (criticality 3 of 5)
  • Pump, compressor and process-machinery makers: casings (criticality 3 of 5)
  • Tractor and farm-machinery makers: chassis and castings (criticality 2 of 5)

Sources: Material Insights; World Steel Association

2. Steel cost in machine prices

Cost and price · Strong · Higher steel prices raise machinery costs and squeeze margins

Because steel and pig iron are the main raw materials for makers such as tractor companies, a steel price rise lifts costs quickly, while machinery prices are set in contracts or dealer price lists that adjust with a lag.

  • 75 to 80% raw materials, chiefly steel and pig iron, as a share of tractor makers' total cost, CRISIL, fiscal 2022
  • 35 to 40% year-on-year rise in steel and pig iron prices, first nine months of fiscal 2022
  • 300 to 400 bps expected fall in tractor makers' operating margin, fiscal 2022

In the 2021 to 2022 steel price spike, Indian tractor makers passed on only part of the cost through price rises, and three large listed makers lost 300 to 350 basis points of margin in the first half of fiscal 2022. The same lag can work in reverse when steel prices fall.

Sources: CRISIL Ratings

3. Steel safeguard duty

Policy · High in India · India's protection for steelmakers raises input costs for machinery makers

India's safeguard duty on flat steel imports protects domestic steelmakers from a surge in cheap imports, but machinery, tractor and construction equipment makers buy that steel, so the duty shifts margin from steel users to steel producers.

  • 12% to 11% safeguard duty on flat steel imports, stepping down from 21 April 2025 to 20 April 2028
  • 6.6 Mt flat steel imports in the investigation period to September 2024, against 2.3 Mt in 2021 to 2022

The duty is 12% in the first year, 11.5% in the second and 11% in the third. User industries and MSME engineering exporters opposed it, saying higher raw material prices would hurt their competitiveness, and construction equipment makers said they rely heavily on imported special steels not made in sufficient quantity in India.

Sources: Outlook Business (PTI); Autocar Professional

For investors

Key learnings

  1. Raw materials, chiefly steel and pig iron, made up about 75 to 80% of tractor makers' cost in fiscal 2022, so the steel price spike that year was expected to cut their margins by 300 to 400 basis points.
  2. Machinery makers lag steel prices on the way up and recover margin on the way down, so the steel cycle is a leading indicator for their earnings.
  3. India's safeguard duty, 12% falling to 11% by April 2028, keeps domestic steel prices higher than they would otherwise be, favouring steelmakers over machinery makers.

What to track

  • Indian hot-rolled coil price: Rises signal margin pressure for machinery, tractor and equipment makers (Weekly · BigMint (formerly SteelMint), JPC)
  • Machinery makers' raw material cost as a share of sales: Shows how much steel cost is being passed on (Quarterly · company results)
  • Flat steel imports into India: Falling imports after the duty show tighter domestic supply and pricing power for steelmakers (Monthly · Joint Plant Committee, Ministry of Steel)

For policymakers

Key learnings

  1. Steel protection and capital goods competitiveness pull against each other: the 2025 safeguard duty helps steelmakers but raises costs for machinery exporters.
  2. Special steels are where India's equipment makers still rely heavily on imports, so domestic capacity in those grades matters as much as total tonnage.
  3. Steel price spikes, as in fiscal 2022, pass quickly into tractor and farm machinery costs, which can slow rural mechanisation.

What to track

  • Safeguard and anti-dumping duties on steel products: New or higher duties raise input costs for machinery makers (As announced · DGTR, Ministry of Finance)
  • Imports of special steels used in machinery: Persistent imports show gaps in domestic special-steel capacity (Monthly · Commerce ministry TradeStat)

India

India's machinery makers buy steel behind a safeguard duty on flat products of 12% falling to 11% by April 2028, and construction equipment makers say they still rely heavily on imported special steels.

Sources

  1. Machinery and equipment: materials, Material Insights (2026)
  2. Sustainable steel: steel use by sector, World Steel Association
  3. Higher steel prices to shave off tractor makers' margin by 300 to 400 bps, CRISIL Ratings (2022)
  4. India imposes safeguard duty for 3 years on certain steel products, Outlook Business (PTI) (2025)
  5. Steel import duty raises concerns among construction equipment manufacturers, Autocar Professional (2025)