Most steel stocks rally on safeguard duty proposal

MUMBAI: Stocks of most of the domestic steel manufacturers rallied on Wednesday after the commerce ministry recommended a 12% safeguard duty on certain steel products for 200 days, to protect the domestic industry from an spurt in imports. Automobile stocks, that use imported as well as domestically produced steel, faced some selling, on fears that their input costs may rise although analysts don't see any immediate hike in steel prices for users.

Among the leaders from the steel manufacturing sector, SAIL rallied to close 4% up, while Tata Steel gained 2.5% and JSW Steel 1.4%. Among the auto sector leaders, the stock price of Maruti Suzuki closed 0.9% lower and M&M was down a marginal 0.2%. On the other hand, Hyundai Motors India was up 2.2% and Tata Motors 0.3%.

According to a report by global financial major JP Morgan, the long-awaited safeguard duty was a positive for the Indian steel industry. "Once implemented, this should increase the landed cost of imports by Rs 5,500-per-ton. But the effective increase in domestic HRC prices could be lower at Rs 2,000/ton," it said.

Analysts feel target prices of stocks of steel manufacturers could be revised upwards for FY26.

"Steel stocks have been rallying of late, led by optimism around China steel output cuts, German infra fund announcement and safeguard duty imposition. Expect stock prices to react positively as it opens up ample room for imagination around profitability improvement and govt's strong intent to support the steel sector," the report said.

There's a possibility that non-integrated producers would gain more from the duty than the integrated producers. Also, there's unlikely to be any immediate hike in domestic prices of steel for users since these prices are already at a premium to import prices, said Shrikant Chouhan, head equity research, Kotak Securities.

"Domestic prices are at a 7-8% premium to import parity, leaving little room for further hikes in the former case. In the past few weeks, Vietnam, South Korea, Europe and the US have imposed/increased tariff barriers against steel imports, whereas investigations are ongoing in a couple of countries, including India," Chouhan wrote in a note. "Steel margins have bottomed out in 3QFY25, and we expect a recovery in 4QFY25, with price hikes and muted costs. However, further expansion is dependent on trade measures and supply-side reforms by China."


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