Steel Stocks Rally Amid Safeguard Duty Proposal

In a significant move to protect the domestic steel industry from a surge in imports, the commerce ministry has recommended a 12% safeguard duty on certain steel products for 200 days. This proposal has led to a rally in the stocks of most domestic steel manufacturers, with SAIL, Tata Steel, and JSW Steel seeing notable gains. Conversely, automobile stocks experienced some selling pressure due to concerns over rising input costs, although analysts predict no immediate hike in steel prices for users.

Impact on the Steel and Auto Sectors

According to a report by JP Morgan, the anticipated safeguard duty is a positive development for the Indian steel industry, potentially increasing the landed cost of imports by Rs 5,500 per ton. However, the effective increase in domestic HRC prices might be lower, around Rs 2,000 per ton. Analysts suggest that the target prices of steel manufacturers' stocks could be revised upwards for FY26, reflecting optimism around profitability improvements and government support for the sector.

Global Context and Future Expectations

Shrikant Chouhan of Kotak Securities notes that domestic steel prices are already at a premium to import parity, limiting the scope for further hikes. With several countries imposing or increasing tariff barriers against steel imports, the global steel market is undergoing significant changes. Analysts expect a recovery in steel margins by 4QFY25, driven by price hikes and controlled costs, though further expansion hinges on trade measures and supply-side reforms in China.