Steel shares jump on likely import duty hike
4 August 2015
Shares of steel companies spiked up to 4 per cent on Tuesday following reports the finance ministry is considering imposition of safeguard duty on import of long and flat steel products.
JSW Steel was the top gainer among large steel companies, with 7 per cent gains. Tata Steel rose 3.4 per cent and Jindal Steel and Power (JSPL) rose close to 2.5 per cent helping the gauge of metal companies up more than 2.5 per cent.
The government is likely to raise import tax by 2.5-3 per cent on flat steel products, according to various TV reports. If implemented, this would be the second hike since in three months. In June, the government raised import duty to 10 per cent from 7.5 per cent on flat steel and to 7.5 per cent from 5 per cent for long steel products to stem the flood of imports.
Among small and medium steel companies, Usha Martin surged 3 per cent while Mukand rose more than 4 per cent. Other companies like Bedmutha Industries, Technocraft Industries, Elctrosteel Steels advanced close to 1 per cent each.
Experts say over production by China coupled with weak demand in European markets has resulted in the fall of margins for steel companies. A industry report published by London-based HSBC equity research said that the ebitda of Indian steel companies fell by 50 per cent. It said, although Indian steel companies have invested over $12 billion in new capacity yet imports have steadily risen.
“The bank debt to steel companies in India crossed $50 billion.It might become a concern for the banking system, if the steel sector is not resilient. We believe Indian companies might continue to hurt for a while,” said Jigar Mistry, analyst, HSBC India in a report published June 30.
Safeguard duty will curb the volume of import of steel into the country and may boost the margins of domestic producers. These duties would also apply to the countries who have signed a Free Trade Agreement (FTA) with India.
As per the statement made by MOS for Steel Vishnu Deo Sai in Rajya Sabha, the volume of imports of stainless steel have surged 49% during the last financial year. As per the Joint Plant committee data, import of steel surged from 5.45 million tonnes in 2014 to 9.32 million tonnes in 2015.