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  • 23 Dec 2024
  • ICICI Securities

GOVERNMENT INITIATED SAFEGUARD INVESTIGATION ON STEEL IMPORTS

News: As per DGTR (Department General of Trade Remedies), the government has initiated a probe into the imports of Non-Alloy and Alloy flat steel products into the country. This includes Hot rolled coils, sheets, and plates, HR plate mill, Cold Rolled (CR) coils and sheets, metallic coated steel coils and sheets, and colour coated coils and sheets. The period of investigation of steel imports is between 1st Oct’23 to 30th Sept’24. Moreover, the domestic steel manufacturers have sought imposition of safeguard measures for a period of 4 years.

Views: The government’s decision to initiate a duty investigation is a prudent step, considering the finished steel imports have surged to 8 years high of 6.5 Million Tons (MT), up by ~27% YoY in the period between April’24 to Nov’24. Particularly, the imports from China have reached all time high to ~1.96 MT during this period. This has led to domestic steel prices declining to 4 years low to ~₹47,500/ton, significantly affecting the revenue and profitability of domestic steel companies. Thus, the duty investigation is expected to help curb the decline in steel prices. Furthermore, the potential imposition of safeguard duties could provide a relief to domestic steel players, particularly the top 4: JSW Steel, Tata Steel, SAIL and Jindal Steel and Power, which are aiming to double their capacity by end of the decade amid healthy demand prospects in the country. Within this space, our top preference is JSW Steel, which is strategically positioned to achieve record profitability given its ambitious expansion plans with the emphasis on value added products and focuses on securing critical raw material. 

Impact: Positive