The government’s move to impose a temporary 12 percent tariff on some steel imports may help domestic manufacturers expand margins in the near term but there is limited room for a price hike, analysts have said.
The safeguard duty, aimed to check cheap shipments flooding the Indian market following US tariffs, won’t help much, as steel continues to trade at a 6 percent premium even after factoring in the new levy, analysts said.
"The provisional safeguard duty imposed by the government will help in protecting the diversion of steel into India to some extent and likely to support steel players profitability in FY26, supported by benign raw material prices," said Priyanka Poddar, associate director, India Ratings and Research.
The safeguard duty, effective from April 21 for 200 days, applies to flat-rolled products of non-alloy and certain alloy steels to shield domestic producers from a surge in cheaper imports, particularly from countries such as China.
It also coincides with India turning a net importer of steel for the second consecutive year in FY25, with imports rising to a nine-year high of 10.1 million tonnes, driven by a surge in finished flat-steel shipment, provisional data from market analytics firm BigMint shows.
India’s steel exports fell more than 60 percent over the past three years to 6.95 million tonnes in FY25, after peaking at 18.51 million tonnes in FY22.
The levy is expected to boost per tonne EBITDA for steelmakers in the near term, the gains may be offset by proposed hikes in mineral taxes by state governments, analysts said.
India is the world's second biggest producer of crude steel. China was the second-biggest exporter of steel to India in FY25 behind South Korea.
Gains may be under pressure in the long term
Analysts also see a downward pressure on prices in the long term, considering the global glut stemming from American tariffs and a possible economic downturn.
Morgan Stanley is cautious about prices. Domestic hot-rolled coil (HRC) prices are at an 18 percent premium to imports. Even after factoring in the new safeguard duty, domestic steel continues to trade at a 6 percent premium, offering little room for further price hikes.
“In our view, this development doesn’t create a case for domestic steel prices to move higher,” the brokerage said, adding the market is unlikely to see a structural uplift in earnings purely on the back of the policy shift.
Elara Capital has flagged concerns over global and domestic oversupply, a slowing global GDP amid tariff uncertainty and the potential devaluation of the yuan, which can erode medium-term gains from the safeguard duty.
Some industry observers also point to a lack of strong demand, as moribund private capital expenditure is now accompanied by sluggish growth in government capex on infrastructure (because of cash-strapped state governments).
In March, domestic steel prices firmed up amid speculation about the safeguard duty but dropped soon amid cautious buying.
"Trades were concluded at lower prices. There is an expectation that mills may introduce price-support measures to counter the sluggish market momentum," BigMint said.
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