Steel Sector Stocks Surge Amid Safeguard Duty Recommendation

Market Performance

Shares of major steel companies, including Tata Steel, JSW Steel, NMDC Steel, APL Apollo Tubes, and SAIL, witnessed a notable increase of up to 7% on March 19. This development came after the Directorate General of Trade Remedies (DGTR) proposed a 12% safeguard duty on specific steel imports.

The share price of NMDC Steel rose by 7.35% to ₹36.07, while SAIL recorded a 3.54% increase, reaching ₹112.75. Tata Steel's stock saw a 2.5% rise to ₹158.50, while Jindal Steel and Jindal Steel & Power shares registered an increase of over 1% each. APL Apollo Tubes also gained 1.7%, reaching ₹1,457.80.

The rally in steel stocks contributed to a 1% rise in the metal index, positioning the Nifty Metal sector among the top-performing indices on the National Stock Exchange (NSE) for the day.

DGTR's Safeguard Duty Proposal

The DGTR has suggested a 12% temporary safeguard duty on certain steel imports for 200 days. This measure aims to mitigate potential risks domestic producers face due to an influx of imported steel products.

The proposed safeguard duty applies to various steel categories, including:

• Hot-rolled coils
• Steel sheets and plates
• Cold-rolled coils and sheets

Over the past month, domestic flat steel prices have risen by 5%, diverging from the declining trend in regional steel prices. The anticipation of the safeguard duty is a key factor behind this price increase.

Impact on the Steel Industry

The global steel trade has witnessed significant pricing shifts due to increased regulatory interventions across different regions. Countries exporting steel, such as China, have experienced pricing pressures while importing nations have seen domestic steel prices rise. Since the beginning of the year, steel export prices in China have dropped by 3%, whereas Indian hot-rolled coil (HRC) prices have increased by 7%.

Currently, Indian domestic HRC prices are trading at a 7-8% premium over import parity, limiting the scope for further price hikes in the short term.

Summary

The steel sector experienced a surge in stock prices following DGTR's recommendation of a 12% safeguard duty on specific steel imports. This move aims to relieve domestic manufacturers facing increased competition from imports. The industry has also observed a rise in domestic steel prices compared to declining export prices in other regions. The implications of this temporary safeguard duty remain a key factor influencing the steel market in the near term.