Analysts mixed on steel duties; EBITDA/tonne may rise, but price hike window limited

While EBITDA per tonne may rise for steelmakers, the window for a price increase may narrow going ahead

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26 Aug, 2025 12:21

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After the Union government's Directorate General of Trade Remedies (DGTR) recommended a 12 percent safeguard duty on steel products for 200 days, mainly on flat steel products such as hot and cold rolled products, brokerages and analysts have presented a mixed picture on the prospects of both integrated and non-integrated steel makers.

Analysts said that as a result of the duties, which are still to be approved by the Union Ministry of Commerce, the earnings before interest, taxes, depreciation, and amortisation (EBITDA) per tonne for steel, a key competitive metric, may increase for steelmakers. Key industry executives have expressed doubts about carrying out large-scale capital expenditure projects for steel capacity expansion, owing to continued price weakness, pressure from cheap steel imports originating in China and Vietnam, and sluggish spending on infrastructure by both Union and state governments.

"The steel EBITDA per tonne can potentially increase by Rs 3,500-4,000 per tonne provided full increase in prices can be undertaken (12 percent). This would be the addition to margins on integrated steel mills especially those with integration in iron ore," said Priyankar Biswas, analyst- India industrials, logistics, and metals at BNP Paribas.

Analysts, however, also noted that prices had already been increasing for various steel products in anticipation of DGTR's safeguard duty investigation wrapping up, and further price increases may not be viable to maintain demand. According to a report from Kotak Securities, domestic steel prices rose by 5 percent over the past month, despite overall weakness in steel prices in the region.

"Domestic prices are at a 7-8 percent premium to import parity, leaving little room for further hikes...In the past few weeks, Vietnam, South Korea, Europe and the US have imposed/increased tariff barriers against steel imports, whereas investigations are ongoing in a couple of countries, including India," said Shrikant Chohan, head of equity research at Kotak Securities.

Kotak Securities has recommended non-integrated steel producers such as Jindal Steel and Power, and Jindal Stainless, over integrated steel producers such as Tata Steel, JSW Steel, and Steel Authority of India Ltd (SAIL). Some analysts said that despite the safeguard duty notionally benefiting all steel producers, the proposals by some state governments to impose taxes on mining takes away some of the benefits that the safeguard duty may bring.

Additionally, analysts also noted that the duty recommended by the DGTR is less than half of what the steelmakers, including the Indian Steel Association (ISA), had requested, at 25 percent. Analysts attributed the relatively lower recommendation of safeguard duty to pushback from key sectors such as automobiles and infrastructure, which have depended on low steel prices over the past year to keep input costs manageable.

The Indian Steel Association (ISA), representing major players like Tata Steel and JSW Steel, had been lobbying for a safeguard duty since December, anticipating a potential surge in imports following higher tariffs imposed by the US. "The ISA will approach the commerce ministry again to seek a revision of the duty to 25 percent," said a person familiar with the matter.

The DGTR's recommendation comes at a time when US president Donald Trump has signalled his intention to continue with tariff-based trade belligerence, especially with China, the world's largest steel manufacturer, on which the US has imposed a 25 percent duty on metal imports. With consumption in China yet to take off after a post-pandemic slump, amid a continued crisis in the country's large real estate sector, Chinese manufacturers have depended on exports to other Asian countries, as well as Europe and other territories to boost their toplines.

Industry observers said that with exports to North American markets to be hit further, China may devaluate its currency to keep their exports competitive globally, and may cause further dumping on countries such as India.