Nomura Research has highlighted the potential benefits of imposing safeguard duties [1] on Indian steel imports. According to the brokerage, such measures could significantly boost domestic steel prices and improve the margins of steel manufacturers. The domestic steel industry has been advocating for a 25% duty on imports to protect against the influx of cheap steel from countries like China and those with free trade agreements (FTAs).
Nomura expects the safeguard duty to be in the range of 10-15%, with a 12% duty likely resulting in landed prices being Rs 4,000 per tonne higher than domestic spot prices. This increase would enable the industry to implement a price hike of Rs 2,000 to 2,500 per tonne.
The report suggests that safeguard duties would be more effective than anti-dumping duties, as they are easier to impose and target all imports, including those from FTA countries. In 2024, imports from FTA countries accounted for 51% of total steel imports, while imports from China made up 30%.
Nomura maintains a positive outlook on the Indian steel industry and has retained its ‘buy’ rating for JSW Steel Ltd. and Jindal Steel And Power Ltd., with target prices of Rs 1,220 and Rs 1,080 per share, respectively. The brokerage also notes that any increase in steel prices could provide an opportunity for domestic iron ore producers to raise their prices. However, Nomura cautions that the window for price hikes may be limited, as global iron ore prices are expected to ease with the resumption of supplies from Australia.
The report further highlights that integrated players like Tata Steel Ltd. and Steel Authority of India Ltd. would be better positioned to handle the impact of higher iron ore prices compared to converters such as JSW Steel and Jindal Steel.
Indian steel stocks have surged on optimistic policy signals from China, Germany, and India. However, the sustainability of this rally depends on various factors, according to JPMorgan. As the domestic steel industry continues to push for safeguard measures, the potential implementation of these duties could play a crucial role in shaping the future of the Indian steel market.
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[1] Safeguard Duties For Indian Steel To Boost Prices, Up Firms’ Margins, Says Nomura https://www.ndtvprofit.com/markets/safeguard-duties-for-indian-steel-to-boost-prices-up-firms-margins-says-nomura