Tata Steel and JSW Steel Drive Steel Sector Growth Amid Proposed Import Safeguard Duty

Shares of Tata Steel and JSW Steel, prominent players in the steel industry, surged over 2.8% each during early trading on Wednesday. This rally followed the government's announcement of a proposed 12% safeguard duty on specific steel imports, leading to increased investor confidence.

Market Reactions

In addition to Tata Steel and JSW Steel, other companies in the sector also experienced gains. The government-owned NMDC Steel Ltd. saw the most significant increase, soaring by 8.3%, while Kalyani Steels Ltd. climbed by 5.8%. Similarly, Steel Authority of India Ltd. reported an increase of nearly 3%.

Details of the Proposed Duty

The Ministry of Commerce and Industry's preliminary findings indicated a plan to implement a provisional safeguard duty for 200 days. This duty affects imports of flat products, including HR coils, sheets, and cold-rolled coils/sheets. These measures aim to protect domestic steelmakers from the impact of cheaper imports, particularly from countries such as China.

The proposal is currently open for public comments for 30 days, with a final decision expected to follow. Analysts predict that the implementation of the safeguard duties could raise the landed cost of imports by approximately Rs 5,500 per tonne.

Industry Perspectives

The Indian Steel Association initiated the investigation by filing a complaint with the Directorate General of Trade Remedies (DGTR). This complaint highlighted a sudden and significant increase in imports, claiming it has caused harm to the domestic industry. Key members of the Association, which include major companies like ArcelorMittal Nippon Steel India, JSW Steel, and Jindal Steel and Power Ltd., have rallied for protective measures.

Rajesh Ravi, senior vice president of institutional equities at HDFC Securities, stated that the proposed safeguard duty could benefit Tata Steel and JSW Steel, which have recently faced a 10-20% downgrade in FY25 earnings estimates. The duty is anticipated to help stabilize domestic steel prices, which have suffered due to imports over the past two years. Additionally, a reduction in China's steel output is expected to bolster global steel prices, leading to potential earnings upgrades for the steel sector over the next three to six quarters.

Overall, the market reactions and industry insights underscore a positive outlook for the domestic steel sector, driven by the prospect of protective measures against foreign competition.

Steel, Imports, Duty