Govt raises import duty for long and flat steel products; stocks up

Experts believe that the rise in import duty would certainly help Indian steel producers counter cheap imports from the countries like China

The government has increased the import duty of flat and long steel products with effect from June 16. Duty on flat products has been raised from existing 7.5 per cent to 10 per cent and on long products it was raised from 5.5 per cent to 7.5 per cent.

The share price of steel-producing companies rose up to 4.5 per cent on Wednesday. While the share price of Uttam Galva increased 4.51 per cent to Rs 34.75 apiece, Tata Steel, JSW and SAIL shares also reported a surge of 3.62 per cent, 3.30 per cent and 1.83 per cent to Rs 305.10, Rs 867.05 and Rs 61.15 apiece, respectively, on Wednesday.

Experts believe the rise in import duty would help Indian steel producers from cheap import, especially from China. India’s steel import surged 71 per cent to 9.31 million tonnes in 2014-15 from 5.45 million tonnes in the previous year.

Sanak Mishra, secretary-general and executive head of Indian Steel Association, said: “We are happy that the government is seized of the issue of huge steel import hurting domestic steel producers, although the duty could have been increased to 15 per cent. That said, the duty increase will help steel companies to increase capacity utilisation which has fallen to 80 per cent due to steep imports in the past few quarters.”

In the second half of FY15, steel imports were on an average one million tonnes a month, while international steel prices went down by 20 per cent. Mishra feels the increased duty will result in reduction in imports to an extent.

“The duty hike will reduce the gap between price of domestic products and landed cost of Chinese steel (currently estimated to be between 12 and 17 per cent) by only 2.5 per cent. The impact of the hike in import duty on the overall steel sector is expected to be moderated positive over the long term. However, any near-benefit is less likely given the bleak consumer spending and falling steel demand. We believe that given the price discount on imported steel, the impact is likely to be minimal on the import,” said Rakesh Valecha, senior director, India Ratings & Research.