The metal stocks are in focus this morning, especially the steel stocks. Some of the steel stocks like SAIL, JSW Steel and Tata Steel are up smartly with as much as 4% intra-day gains. The Nifty Metal Index is up 1.4% and the BSE Metal Index is up 1.5% intra-day. This is after the Commerce Ministry arm, the Directorate General of Trade Remedies (DGTR) recommended imposing 12% provisional safeguard duty for 200 days. This ad valorem duty will be imposed on select steel products and the aim os to protect the interest of domestic steel players as imports surge.
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The DGTR had launched a probe last December to determine whether to impose a so-called safeguard duty as record imports into the country forced top steel mills to petition the government. The safeguard duty has been proposed to be levied on select products including hot-rolled coils, steel sheets and plates and cold-rolled coils and sheets. The Ministry of Steel initiated a safeguard duty investigation for assessing the impact of damage caused to the domestic steel industry due to increased imports. The investigation could take as long as six months.
Precedent of safeguard duty on steel
If we look at historical developments, in FY16 during the government imposed a 20% safeguard duty on import of HRC for 200 days during the anti-dumping investigation. Following the conclusion of this investigation, the safeguard duty was removed and an anti-dumping duty (ADD) was imposed on Chinese steel imports in FY17. The Ministry of Steel initiated a safeguard duty investigation for assessing the impact of damage caused to the domestic steel industry due to increased imports. The investigation could take as long as six months.
JPMorgan on safeguard duty for steel products
According to a JPMorgan report, the “long-awaited safeguard duty finally announced – 12% for 200 days is a positive for Indian Steel companies. Once implemented, this should increase the landed cost of imports by Rs 5,500/tonne. But the effective increase in domestic HRC prices could be lower at Rs 2,000/tonne.”
JPMorgan expects complete flow through to EBITDA and they see scope for earnings estimates to be revised upwards for FY26.
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Steel stocks have been rallying on the back of optimism around Chinese output cuts,
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