India’s Propane Crisis: How Industrial Gas Shortages Are Threatening Galvanized & Coated Steel Production

While the Strait of Hormuz crisis has dominated headlines for its impact on crude oil prices and ocean freight, a quieter but potentially more disruptive consequence is unfolding in India’s industrial gas supply chain. Propane — an unglamorous but operationally critical fuel — is becoming scarce, and the consequences for India’s galvanized and colour-coated steel industry could be severe.

This is not a hypothetical risk. Multiple industry sources confirm that plant-level disruptions have already begun at some facilities. If the shortage persists beyond the next 2–3 weeks, India faces potential production losses in a steel segment worth an estimated ₹60,000–70,000 crore annually.

India’s Propane Import Dependency: The Numbers

India consumed approximately 5.8 million MT of LPG and propane for industrial purposes in FY2025, separate from the roughly 30 million MT used for household cooking. Of the industrial portion, an estimated 35–40% is imported, with the majority originating from West Asian producers:

— Saudi Arabia: Largest single supplier, accounting for roughly 40% of India’s propane imports. Saudi Aramco’s monthly Contract Price (CP) is the benchmark for Asian propane markets.
— Qatar: Supplies approximately 20–25% of India’s imported propane, primarily from the Ras Laffan terminal.
— UAE: Accounts for 15–20% of imports, from the Jebel Ali and Ruwais terminals.
— Kuwait, Bahrain, and others: Smaller but collectively significant at 10–15%.

Nearly all of these cargoes transit the Strait of Hormuz. With the strait effectively closed since February 28, Indian importers face a supply bottleneck with no quick workaround.

What Has Happened to Prices and Availability

The disruption has manifested across three metrics simultaneously:

Spot prices: Far East propane spot has moved from approximately $580/MT in late February to $680–700/MT by mid-March — a 17–20% increase. This is the steepest two-week propane rally since 2022. The Mont Belvieu (US Gulf) benchmark has risen more modestly (+8%), creating a widening East-West arbitrage that may eventually attract US cargoes to Asia, but not quickly enough to offset current shortages.

Cargo arrivals: Of the 12–15 propane/LPG tankers that were scheduled to arrive at Indian ports (Kandla, Mumbai, Mangalore, Vizag) during the first two weeks of March, industry sources estimate that 5–7 have been delayed, diverted, or cancelled. Rerouted cargoes via the Cape of Good Hope add 18–22 days to delivery schedules.

Inventory at terminals: Indian Oil Corporation (IOCL), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL) operate propane/LPG import terminals with combined storage capacity of approximately 1.5–1.8 million MT. Current inventory levels are reported to be 15–20% below seasonal norms, with drawdown accelerating as imports lag consumption.

Why Propane Cannot Be Easily Substituted

A common question from those outside the steel coating industry: can’t facilities simply switch to natural gas or electricity? The answer is nuanced:

Natural gas (PNG via pipeline): Technically feasible for many galvanizing lines, and some large producers (particularly in Gujarat, where city gas distribution networks are well-developed) already use PNG as a primary or backup fuel. However, switching requires compatible burner systems, and not all facilities are connected to gas pipelines. Expanding pipeline connectivity to industrial clusters in states like Maharashtra, Karnataka, or Tamil Nadu is a multi-year infrastructure project, not a crisis response.

LPG (butane-propane mix): Already used interchangeably with propane in some applications, but LPG faces the same import disruption since it originates from the same West Asian sources and transits the same strait. Domestic LPG production from refineries is largely allocated to household cylinders — a politically non-negotiable priority.

Electricity (induction or resistance heating): Electric heating systems for zinc baths do exist but are uncommon in India’s installed base. Retrofitting a propane-fired galvanizing line to electric heating is a capital-intensive project (₹5–10 crore per line, depending on capacity) with a 6–12 month implementation timeline. It is a strategic long-term option, not a solution for the current crisis.

Hydrogen blending: Pilot-stage technology. Some European galvanizing facilities are experimenting with hydrogen-natural gas blends, but this is years away from commercial deployment in India.

The reality is that for the majority of India’s installed galvanizing and colour-coating capacity, propane (or LPG) is the only operationally available fuel in the near term.

What Happens Inside a Galvanizing Line When Propane Runs Short

For those unfamiliar with the process, here is why even a partial propane shortage creates operational problems far beyond a simple cost increase:

The zinc bath: In a continuous hot-dip galvanizing (HDG) line, steel strip passes through a bath of molten zinc maintained at 450–460°C. The bath typically contains 150–300 tonnes of molten zinc (depending on line capacity), heated by propane-fired burners positioned around the ceramic-lined pot.

Temperature precision is non-negotiable: The zinc bath temperature must be controlled within a ±5°C window. If temperature drops below 445°C, the zinc becomes too viscous for uniform coating. If it rises above 465°C, excessive zinc-iron alloy formation occurs at the steel surface, producing a dull, brittle coating that fails quality specifications.

Burner performance degrades with inconsistent supply: When propane supply pressure fluctuates (as it does when terminal operators ration deliveries), burner output becomes uneven. This creates thermal gradients across the zinc bath — one end may be at 455°C while the other drops to 440°C. The result is inconsistent coating thickness across the strip width, leading to edge defects and customer rejections.

Shutdown and restart costs are enormous: If a galvanizing line must shut down due to fuel unavailability, the zinc bath must either be kept molten (consuming fuel even while non-productive) or allowed to solidify. Resolidifying and remelting 200+ tonnes of zinc takes 3–5 days and risks cracking the ceramic pot lining — a repair that can cost ₹1–2 crore and take 2–3 weeks. Most operators will choose to keep the bath molten at reduced temperature rather than risk a full shutdown, but this still consumes propane without producing saleable output.

Which Producers Are Most Exposed

India’s coated flat steel capacity is concentrated among a handful of major producers:

JSW Steel Coated Products: Operates galvanizing and colour-coating lines at Vasind (Maharashtra), Tarapur (Maharashtra), Kalmeshwar (Maharashtra), and Salem (Tamil Nadu). Maharashtra facilities are particularly exposed due to limited PNG pipeline access for industrial users.

Tata Steel (including Tata Steel BSL): Operates HDG and colour-coating at Jamshedpur (Jharkhand), Sahibabad (UP), and through the erstwhile Bhushan Steel facilities. Jharkhand has moderate city gas coverage but not at industrial scale in the steel cluster.

ArcelorMittal Nippon Steel India (AM/NS): Operates large-scale HDG at Hazira (Gujarat). Gujarat’s relatively well-developed gas grid provides some buffer, making AM/NS potentially less vulnerable than Maharashtra-based producers.

Jindal Stainless and other secondary producers: Multiple induction-furnace-based producers in Raipur (Chhattisgarh), Mandi Gobindgarh (Punjab), and other clusters operate smaller galvanizing units. These facilities typically have minimal fuel storage and rely on just-in-time propane delivery — making them the most immediately vulnerable to supply disruptions. Industry sources indicate some of these units have already experienced interruptions.

Downstream Impact: Who Gets Hurt

India’s galvanized and colour-coated steel production (estimated at 12–14 million MT per annum) feeds into sectors where supply disruption has immediate, visible consequences:

Construction and roofing (∼40% of coated steel consumption): Galvanized corrugated sheets and colour-coated roofing panels are the dominant roofing material for residential construction in tier-2/3 cities and rural India. The ongoing spring construction season (March–June) is peak demand period. Supply shortages would directly delay housing completion and push up costs for builders already operating on thin margins.

Infrastructure (∼20%): Highway guardrails (mandated to be galvanized under NHAI specifications), transmission tower components, solar mounting structures, and bridge components all require hot-dip galvanized steel. Government infrastructure timelines under Bharatmala, Sagarmala, and the National Infrastructure Pipeline could face material-driven delays.

Renewable energy (∼10%): India’s solar installation target of 50 GW per year requires approximately 60,000–80,000 MT of galvanized mounting structures per GW. A coated steel shortage during Q1 FY2027 could delay solar commissioning targets and affect power purchase agreement (PPA) timelines.

Automotive and appliances (∼15%): OEMs use galvannealed and electrogalvanized steel for body panels, while appliance manufacturers use pre-painted galvanized steel (PPGI) for exterior panels. Automotive supply chains operate on 2–4 week inventory buffers; a sustained coated steel shortage would trigger production line stoppages at OEM plants.

Pre-engineered buildings (PEB) (∼10%): The PEB sector, growing at 15–20% annually in India, uses galvanized purlins, sheeting, and structural members. PEB contractors typically procure coated steel 4–6 weeks ahead of erection — those who have not yet secured April–May material could face significant cost escalation or delivery delays.

What the Government Should Consider

The propane shortage is an industrial policy problem, not just an energy market event. Several measures could mitigate the damage:

1. Temporary import duty relief: India currently levies a 2.5% basic customs duty on propane imports (HS 2711.12). Temporarily suspending this duty for industrial-grade propane would reduce landed costs by $15–18 per MT and signal policy support for manufacturing continuity.

2. Industrial allocation guarantee: The Petroleum and Natural Gas Regulatory Board (PNGRB) could issue a directive ensuring that a minimum percentage of available propane/LPG stocks are reserved for critical industrial users, preventing complete diversion to the household segment. A 70:30 household-to-industrial split (vs. the current effective 85:15 during shortages) would meaningfully improve industrial availability.

3. Emergency procurement from non-Gulf sources: Government-facilitated term contracts for propane from the US Gulf Coast (Enterprise, Targa terminals), West Africa (Nigeria LPG), or Australia could begin delivering within 30–40 days. The price premium over Gulf propane would be $30–50/MT due to longer shipping, but this is far less costly than production shutdowns.

4. Accelerated PNG pipeline connectivity: GAIL operates approximately 22,000 km of gas pipeline across India, but many industrial clusters with galvanizing capacity are not connected. Expediting last-mile connectivity to major steel coating hubs — Vasind/Tarapur (Maharashtra), Raipur cluster (Chhattisgarh), Mandi Gobindgarh (Punjab) — would create structural resilience for future disruptions.

5. Strategic propane reserve: India maintains strategic petroleum reserves at Visakhapatnam, Mangalore, and Padur for crude oil. A similar concept for industrial LPG/propane — even a modest 15–20 day buffer stock at key import terminals — would prevent a logistics disruption from becoming an industrial crisis. The estimated cost of building such a reserve is ₹800–1,200 crore, modest relative to the ₹60,000+ crore annual output of the coated steel sector it would protect.

The Bigger Picture: India’s Industrial Energy Security

The propane-to-galvanizing vulnerability is a microcosm of a broader issue: India’s steel industry, the world’s second-largest, remains deeply dependent on imported energy inputs at every stage of the value chain. From coking coal for blast furnaces to propane for coating lines, critical industrial fuels are sourced from a small number of geographically concentrated suppliers and transported through a handful of maritime chokepoints.

As India pursues its target of 300 million MT of annual steel capacity by 2030 (up from approximately 160 MT today), the volume of imported energy inputs will only grow. The Hormuz crisis has exposed the fragility of a supply chain that was optimised for cost and convenience but not for resilience.

The steel industry’s long-term answer lies in fuel diversification (electrification of heating, green hydrogen, domestic gas expansion), supply route diversification (reducing West Asian concentration), and strategic buffering (reserves for critical industrial inputs). These are multi-year investments. The immediate priority is ensuring that the current disruption does not shut down galvanizing lines that supply steel for India’s housing, infrastructure, and energy transition.

SteelMath will continue tracking propane availability, coated steel pricing, and downstream supply chain impacts as the situation develops.