Tata Steel & 4 Other Stocks in Focus as Govt Proposes 12% Safeguard Duty on Steel Imports
Tata Steel : In a significant move to protect domestic steel manufacturers, the Directorate General of Trade Remedies (DGTR) has proposed a 12% provisional safeguard duty on Flat Steel Products for 200 days. This decision, pending a final review, aims to mitigate the impact of rising steel imports, which have been causing distress to the local industry.
While the industry initially sought a 25% safeguard duty, the DGTR has settled for a lower temporary rate of 12%, ensuring immediate relief while further assessments continue. The duty will be imposed ad valorem, meaning it will be calculated as a percentage of the import value, rather than as a fixed amount.
The recommended safeguard duty covers Non-Alloy and Alloy Steel Flat Products, including Hot Rolled and Cold Rolled coils, sheets, plates, HR Plate Mill Plates, Metallic Coated and Colour Coated Steel. Additionally, Galvanneal-coated products with Zinc, Aluminium-Zinc, or Zinc-Aluminium-Magnesium are included in the scope. The Finance Ministry must now officially notify the duty before it comes into effect.
Why is the Safeguard Duty Necessary?
The DGTR’s decision comes in response to a sharp surge in steel imports, which has been severely affecting domestic manufacturers. Without protective measures, the increased competition from foreign steelmakers could lead to significant financial losses for Indian steel companies, potentially resulting in job cuts and production slowdowns.
Additionally, analysts at Kotak Institutional Equities have noted that domestic steel prices already carry a 7%-8% import parity premium, meaning prices are higher than the global rates. This limits the possibility of further price hikes despite the introduction of safeguard duties.
Steel Stocks in Focus
Following this announcement, several steel companies saw a rise in their stock prices. Here’s a look at five key stocks that gained traction:
1. Tata Steel Ltd
Tata Steel, one of India’s largest steel manufacturers, operates globally with an annual crude steel capacity of approximately 35 million tons. The company’s stock rose by 2.55%, reaching ₹158.60 per share.
- Market Capitalization: ₹1.97 lakh crore
- Business Segment: Steel manufacturing & distribution
2. JSW Steel Ltd
JSW Steel, known for its diverse range of steel products, has manufacturing units across Karnataka, Maharashtra, and Tamil Nadu. The stock climbed 1.29%, trading at ₹1,031.65 per share.
- Market Capitalization: ₹2.52 lakh crore
- Business Segment: Iron & steel products manufacturing
3. Steel Authority of India Ltd (SAIL)
A state-owned entity, SAIL operates five integrated steel plants and three alloy steel plants. It witnessed a 4% surge in share price, reaching ₹112.60 per share.
- Market Capitalization: ₹46,504.84 crore
- Business Segment: Steel manufacturing & sales
4. Jindal Steel And Power Ltd
Jindal Steel & Power operates across three verticals: Iron & steel products, Power, and Others. The company’s shares gained 1.10%, trading at ₹933.70 per share.
- Market Capitalization: ₹95,245.63 crore
- Business Segment: Steel, sponge iron, pellets, and power production
5. NMDC Ltd
NMDC is primarily engaged in mineral exploration, including iron ore, copper, and rock phosphate. The company’s stock increased 0.90%, closing at ₹67.45 per share.
- Market Capitalization: ₹59,300.81 crore
- Business Segment: Mining & mineral exploration
Financial Ratios of Steel Companies
| Company | Market Cap (₹ Cr) | Stock Price (₹) | % Change | Business Segment |
|---|---|---|---|---|
| Tata Steel | 1,97,000 | 158.60 | +2.55% | Steel manufacturing |
| JSW Steel | 2,52,000 | 1,031.65 | +1.29% | Iron & steel products |
| SAIL | 46,504.84 | 112.60 | +4.00% | Steel manufacturing |
| Jindal Steel & Power | 95,245.63 | 933.70 | +1.10% | Steel & power production |
| NMDC | 59,300.81 | 67.45 | +0.90% | Mining & minerals |
What’s Next for the Steel Industry?
With the proposed 12% safeguard duty, domestic steel manufacturers are likely to experience short-term benefits, including increased sales and better profit margins. However, in the long term, factors such as China’s supply policies, global demand fluctuations, and further government interventions will determine how the Indian steel industry progresses.
Frequently Asked Questions (FAQs)
1. What is the 12% safeguard duty on steel imports?
The 12% safeguard duty is a temporary tariff imposed on imported steel products to protect domestic manufacturers from rising imports. It will last for 200 days while a final review is conducted.
2. Why was the safeguard duty imposed?
The duty was imposed due to a sharp increase in steel imports, which was harming the Indian steel industry by reducing demand for locally produced steel.
3. Which steel products are affected by the safeguard duty?
The duty applies to Flat Steel Products, including Hot Rolled and Cold Rolled coils, sheets, plates, HR Plate Mill Plates, and metallic-coated steel.
4. How will the safeguard duty impact Indian steel companies?
Indian steelmakers like Tata Steel, JSW Steel, SAIL, Jindal Steel, and NMDC are expected to benefit as the duty discourages cheaper imports, potentially increasing local demand and profitability.
5. What are the market reactions to the safeguard duty?
Steel stocks rose after the announcement, with SAIL gaining the most (+4%). Investors expect improved financial performance for Indian steel companies in the short term.
6. Will this duty lead to higher steel prices in India?
Not necessarily. Kotak Institutional Equities suggests that domestic steel prices already carry a 7%-8% import parity premium, limiting the scope for further price hikes.
Conclusion
The 12% safeguard duty on steel imports is a strategic move to support domestic steel manufacturers. While it has already boosted investor sentiment, the long-term impact will depend on global market trends, policy decisions, and demand-supply dynamics. Steel stocks remain in focus, making this an interesting sector for investors to watch in the coming months.
What are your thoughts on the impact of this safeguard duty? Let us know in the comments! 🚀
For more market insights, follow our news.
Stay tuned for more updates and insights on the stock market! For more insights on investing in the Indian stock market, check out resource like MoneyControl, ET, NSE India.
Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.