The industry expects the safeguard duty of 20 per cent imposed by the Centre to provide a major relief for steel companies, which are reeling under rising costs, especially after huge capital investment and aggressive bidding for coal blocks.

The industry feels capacity utilisation will increase gradually from the current level of 80 per cent, with increasing demand in the domestic market.

TV Narendran, Managing Director of Tata Steel (India & South-East Asia) said the safeguard duty should help curb surging imports and predatory pricing, which has seen an increase of about 60 per cent over the same period last year.

The Centre has recognised the issues being faced by the domestic steel industry arising out of dumping of steel from countries having surplus steel capacities, he said.

Jayant Acharya, Director (Commercial and Marketing), JSW Steel said the fresh duty is a big relief for the industry and will improve capacity utilisation, as demand in the domestic market improves.

‘Checks dumping’ Acknowledging the swift action taken by the Government, Acharya said the industry would benefit not only from the drop in unprecedented shipment from China, but also stem the dumping by Japan and Korea, which had free trade agreement with India. Urging the Government to assess the pros and cons of bilateral and multilateral trade agreement to achieve the stated objectives, including strengthening domestic industries, Narendran said the steel industry needs to be nurtured by improving factor costs, including logistics, besides regulatory costs and cost of capital.

Safeguard duty is considered a better alternative to import duty, as it is applicable to all nations unlike the latter, which excludes countries with free trade agreements.

The 200-day safeguard duty will not solve all the problems facing the industry, but will provide temporary relief, said Vivek Jain, Associate Director, India Rating and Research.

Import duty Iron and steel was sixth largest product imported item into the country and was up 58 per cent in the first quarter of this fiscal, he said.

Unlike last time, when import duty was hiked by 2.5 per cent to 12.5 per cent, Chinese steel companies will find it difficult to drop prices by ₹2,000 a tonne now, to make their shipment attractive to India, said an analyst.

Goutam Chakraborty, Research Analyst, Emkay Global Financial Services, said shares of most steel companies were down due to profit-booking as stocks have run up sharply in anticipation of the duty.

Moreover, he added, profitability of these companies will not improve until they manage to hike prices and demand improves.

Shares of Tata Steel were plunged 5 per cent to ₹229, while JSW Steel dipped 4.81 per cent to ₹945. Steel Authority of India and Jindal Steel & Power were down 3.36 per cent and 2.65 per cent at ₹50 and ₹62 on Wednesday.

Related Topics