Govt panel okays 20% safeguard duty on steel products
14 September 2015
Stocks of steelmakers jumped up to 4 per cent in trade on Monday amid reports that the committee of secretaries has approved a 20 per cent safeguard duty on import of steel products.
Finance ministry and steel ministry officials met on September 12 to study the recommendations made by the Directorate General of Safeguards. In 2009, the government did not impose any safeguard duty on hot-roll coil (HRC) imports despite a DGS recommendation.
Tata Steel jumped 4.22 per cent to hit a high of Rs 242.90 on BSE. JSW Steel rose 3.73 per cent to hit Rs 998.90.
According to a recent report by Bank of America-Merrill Lynch (BofA-ML), SAIL and JSW Steel are likely to benefit the most from the imposition of 20 per cent safeguard duty on imports of hot-rolled steel products on account of higher realisations and lower costs.The duty recommendation had come on the back of a nearly 20 per cent decline in domestic prices of HRC, increased import of steel led by China, Russia and Ukraine and unforeseen depreciation in Chinese yuan.
Brokerage Macquarie, in a recent note, had said that even with the imposition of the 20 per cent safeguard duty, there is room for only a 7-8 per cent increase in domestic prices against a 15 per cent drop in prices FYTD16 and 20 per cent drop in the ongoing calendar year so far.
"At current import prices and currency, we calculate only a $35-40/tonne increase in domestic HRC prices. Our FY16E estimates already factor in a ~$50/ton recovery in margins from the 1Q16 run rate, so our numbers may still have downside risk. Consensus has gone below our estimates by 7-10% at Ebitda and may see minor upgrades," it said in the note.