SAIL shares jump 4% after DGTR recommends safeguard duty; JSW Steel, Tata Steel shares advance

As per an overnight notification, the DGTR has proposed the imposition of a provisional 12% safeguard duty on Flat Steel products ad valorem for 200 days, pending final investigation. The industry had been demanding the imposition of a 25% safeguard duty.

The DGTR has recommended the imposition of the safeguard duty on these Non-Alloy and Alloy Steel Flat Products:

• Hot Rolled coils, sheets and plates
• HR Plate Mill Plates
• Cold Rolled coils and sheets
• Metallic Coated Steel coils and sheets, both profiled or not and
• Colour coated coils and sheets, whether profiled or not

Galvanneal coated with Zinc or Aluminium-Zinc or Zinc-Aluminium-Magnesium, will also fall under the scope of this duty.
The imposition of the duty will have to be notified by the Finance Ministry.

The authority noted in its notification that there has been a recent, sudden, sharp and significant increase in the imports of these products into India, thereby causing and threatening to cause serious damage to the domestic industry and producers of these products.

It also noted that there exist critical circumstances, where any delay in application for provisional safeguard measures would cause damage which would be difficult to repair and that there is a necessity for immediate application of provisional safeguard measures.

The imposition of a safeguard duty on steel imports was a long standing industry demand and sources had told CNBC-TV18 last year that while the government is sympathetic to concerns of the domestic steel industry, it intends to balance interests of local industry with the right of downstream and end users to get affordable steel.

In a note on Tuesday, brokerage firm Kotak Institutional Equities wrote that domestic steel prices are already at a 7% to 8% premium to import parity, leaving little room for further hikes in case a safeguard duty is implemented. While margins for these companies have bottomed in the December quarter, potential supply reforms in China are an upside risk, according to the brokerage.

Among stocks, it finds better risk-reward in non-integrated steel producers such as JSPL and Jindal Stainless, while it has a “sell” rating on integrated producers like SAIL, Tata Steel and NMDC.

The Nifty Metal Index is up 10% in the month of March so far, and is the best performing sectoral index this month. Stocks like Tata Steel (up 13%), JSPL and JSW Steel (up 8% each) have done well so far in March.

Also Read: NMDC Steel outperforms other peer companies after DGTR recommends safeguard duty