Synopsis
Nomura Research indicates that protective measures for India's steel industry could significantly boost domestic manufacturers' margins, as the sector seeks government intervention against cheap imports, particularly from China.Key Takeaways
- Protective duties could lead to increased steel prices.
- Nomura predicts a 10-15% safeguard duty on imports.
- Tata Steel's CEO notes government consideration of anti-dumping duties.
- Domestic producers may benefit from higher margins.
- Chinese steel prices remain low, affecting market dynamics.
Mumbai, March 7 (NationPress) Any initiatives to protect India’s steel sector would likely elevate prices and enhance the profit margins of local manufacturers, according to a report released by Nomura Research on Friday. The domestic industry has called on the government to restrict the influx of inexpensive imports into the nation.
Nomura anticipates a safeguard duty set between 10-15 percent on steel imports. With a projected 12 percent duty, the landed prices would be Rs 4,000 per tonne higher than current domestic spot prices, the report indicates. "We believe the industry could implement a price increase of Rs 2,000 to 2,500 per tonne under these circumstances," the report elaborates.
Tata Steel's CEO and Managing Director, TV Narendran, recently stated that the government is taking the steel industry’s request for anti-dumping duties very seriously, as cheap imports from China are saturating the Indian market, a situation that has worsened with the potential rise in U.S. tariffs.
Narendran expressed optimism that the government would soon provide an update following detailed feedback from the industry.
Nomura analysts suggest that safeguard duties would be more effective than anti-dumping duties, as they can be more easily enforced and would target all imports, including those from countries with free trade agreements. "Imports from FTAs constituted 51 percent in 2024, while 30 percent came from China," they stated.
Any rise in steel prices could present an opportunity for domestic iron ore producers to increase their prices. "We believe the price increase window is smaller for domestic producers, as supplies from Australia are resuming, leading to an impending decline in global iron ore prices," the report mentions.
Nomura also noted that a Rs 600 per tonne increase in iron ore prices would result in a Rs 1,000 per tonne rise in the consumption costs for converters like JSW Steel and Jindal Steel. "Integrated companies such as Tata Steel Ltd and Steel Authority of India Ltd would be in a stronger position in such a scenario.
The Indian Steel Association (ISA) has already submitted an application to the Directorate General of Trade Remedies (DGTR) regarding the dumping issue, which is currently under review.
Narendran highlighted that India is among the best locations globally for steel production, boasting highly modern and efficient plants, as well as abundant iron ore reserves. However, the challenge lies in the low prices at which foreign entities sell steel.
He pointed out that the profitability of the Chinese steel sector is largely negative, with many state-owned companies incurring losses. In contrast, India's steel industry is predominantly private, and without profitability, companies will hesitate to invest in expanding capacity.
