Tata Steel hits over 3-month high in a weak market; stock up 6% in 4 days

The removal of export duty is a significant relief and a long term positive for the domestic steel sector, according to analyst at ICICI Securities.

Shares of Tata Steel rose 1 per cent to hit an over three-month high of Rs 111.60 on the BSE in Friday’s weak market. The stock was trading at its highest level since August 19, 2022. In comparison, the S&P BSE Sensex was down 0.82 per cent at 62,764 at 11:48 am.

The stock of the Tata Group iron & steel company was trading higher for the fourth straight day, having gained 6 per cent during this period. In the past one month, it has rallied 10 per cent as against a 3 per cent rise in the benchmark index.

However, in the past six months, Tata Steel has underperformed the market as well as its peers with a 3 per cent gain on weak earnings as compared to a 12 per cent rally in the Sensex. While, JSW Steel (up 29 per cent) and Jindal Steel & Power (49 per cent) have seen their market price surging more than 25 per cent during this period.

Last month, in a bid to provide a fillip to the domestic steel industry and boost exports, the government withdrew the 15 per cent export duty on steel products (which was earlier levied during May 2022).

Steel products now attract nil export duty compared to 15 per cent earlier. The removal of export duty is a significant relief and a long term positive for the domestic steel sector, according to analysts at ICICI Securities.

The government has also withdrawn the export duty on iron ore lumps and fines below 58 per cent Fe content and iron ore pellets. Export of iron ore lumps and fines above 58 per cent Fe content will now attract a lower duty of 30 per cent (reduced from 50 per cent 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 The import duty concessions on anthracite/PCI coal, coking coal, coke & semi coke and ferronickel have also been withdrawn.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 came into effect from November 19, 2022.

"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, which has put downward pressure on steel prices. As steel prices in the global market are currently muted, hence export volumes are likely to pick up notably only when global prices recover. However, 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 the global steel prices strengthens", the brokerage said in a sector update. It upgraded Tata Steel from HOLD to BUY.