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Removal of steel export duty to add lustre...


What's Buzzing
In a bid to provide a fillip to the domestic steel industry and boost exports, the government has restored the status quo, which was prevailing prior to May 22, 2022.
Context
The government has withdrawn the 15% export duty on steel products (that was earlier levied in May 2022). Steel products now attract nil export duty compared to 15% earlier. The government has also withdrawn the export duty on iron ore lumps and fines below 58% Fe content and iron ore pellets. Export of iron ore lumps and fines above 58% Fe content will now attract a lower duty of 30% (reduced from 50% earlier). The import duty concessions on anthracite/PCI coal, coking coal, coke & semi coke and ferronickel have also been withdrawn. All these changes in duty are came into effect from November 19, 2022.
Our Perspective
The removal of export duty augurs well for domestic steel players albeit over a longer term horizon. Global steel demand has turned subdued since May 2022, putting downward pressure on steel prices. As steel prices in the global market are currently muted, hence export volumes are likely to pick up notably when international prices recover. Export volumes had been witnessing a declining trend over the last few months. Indian steel exports dipped significantly by ~53% YoY in H1FY23 (April–September 2022) to ~5.1 million tonnes (MT) compared to ~10.9 MT in H1FY22 (April–September 2021). For H1FY23, flat steel products exports declined ~44% YoY to 3.66 MT (6.53 MT in H1FY22), semis export volume declined ~66% YoY to ~1 MT (~3 MT in H1FY22) and long steel products export volume declined ~69% YoY to ~0.43 MT (~1.4 MT in H1FY22). The recent step of removal of export duty on steel products does provide an opportunity for domestic players to enhance their export volume notably as and when international steel prices strengthen. Furthermore, even though current domestic HRC prices are at a premium to landed cost of imports, the recent relief measure is likely to keep domestic steel prices stable around current levels in the near term. While we do not expect a major uptick in domestic carbon steel prices, we believe a significant sector headwind has been removed. Stainless steel players viz. Jindal Stainless (JSL) & Jindal Stainless (Hisar) (JSHL) are expected to be key beneficiaries. Currently, the export market is more favourable for stainless steel players compared to carbon steel players as European players have curtailed production due to the ongoing energy crisis. With the recent relief, the share of exports is expected to increase for both JSL and JSHL.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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