India gearing up for imposition of safeguard duty on metals

Metal has been the top performing sector in the past one month and is up 6% vs. ~2% decline in the Nifty Index i.e. outperformance of nearly 8%

As per media sources, India’s Directorate General of Trade Remedies (DGTR) has proposed the imposition of a safeguard duty of 12% - 15% on steel imports, with preliminary findings expected this week. This is subject to imported price of HRC being <US$ 650/tonne (₹ 56,500/tonne) vs. the prevailing domestic HRC price of ~₹ 49,500/tonne, thereby providing sufficient scope in present times.  

This step is crucial, especially as the U.S. has imposed a 25% tariff on all aluminium and steel imports this week. With such high tariffs in place, there is an increased risk of steel dumping into India, particularly from Japan and Vietnam, which are among the U.S.'s major trading partners.

Additionally, the European Union has announced new steel import restrictions, with India’s HRC quota expected to be reduced by 23%, along with limits on CRC, plates, and hot-dip galvanized steel. This could negatively impact domestic steel players, as Europe accounted for over 40% (3.3 MT) of India’s total steel exports in FY24.

Given these developments, imposing a safeguard duty on steel imports is imperative in this current scenario. This measure would enable domestic steel manufacturers to raise steel prices by ₹2,000 to ₹3,000 per tonne, boosting profitability.

Notably, the ongoing safeguard duty investigation has already led to a 30% YoY decline in steel imports, bringing them down to ~0.6 MT in Feb’25. As a result, domestic steel prices have increased by ~₹2,500/tonne, rising to ~₹49,500/tonne from a four-year low of ~₹47,000/tonne.
This combined with lower raw material costs, this is expected to aid margin recovery for steel players from Q4FY25 onwards.

Thus, we remain positive on the steel sector, with JSW Steel and Jindal Steel & Power as our top picks due to their strategic capacity expansion, strong domestic demand outlook, and improving profitability prospects. Our last rating on JSW Steel was BUY with a target price of ₹1,130 (9x Avg FY26E-27E EV/EBITDA). Additionally, we have BUY rating on Jindal Steel & Power with a target price of ₹1,000 (8.5x Avg. FY26E-27E).

Post the imposition of safeguard duty we expect further ~10% upgrade in our target prices.