Domestic steel sector hits by moving train post govt’s duty steps

The domestic steel sector has been hit by a moving train, rating agency Icra said reacting to the duty-related steps taken by the government. On Saturday, the government increased the duty on iron ore exports by up to 50% and a few steel intermediaries by 15%. It also declared waiving of customs duty on some raw materials imports, including ferronickel and coking coal, utilised by the steel industry. On Monday, Icra said the steel industry has been hit by a moving train as the government cracks the whip and charges an export duty to reign in raised costs. Nearly 95% of India's finished steel export basket has been hit with 15% export duties. Domestic steel prices could potentially correct by 10%-15% in the forthcoming months as demand enters the seasonally weak monsoon quarter. Icra further said expansion plans of many steelmakers could also be affected if the duties are maintained in the medium term. Jayanta Roy, Senior Vice-President, and Group Head, Corporate Sector Ratings, Icra, told the media that Indian mills registered a 25% year-on-year (YoY) increase in finished steel exports as they took the advantage of raised seaborne prices in FY22. Vietnam, Europe, and the Middle East were the three largest destinations for Indian steel exports, jointly accounting for approximately 50% of India's overall steel exports. Many of these destinations would become less appealing now as mills estimate the economics of a higher duty. Also, with steel export offers for deliveries to Europe is increased by 10%-11% over more competitive markets like South-East Asia and the Middle East, the negative impact of the new export duties on steel exports to Europe would be somewhat less intense than that of South-East Asia and the Middle Eastern markets, he said. Image Source Also read: Govt waives customs duty on imports of certain raw materials