Safeguard duty on steel imports a short-term positive, but no trigger for price hikes, says Morgan Stanley

Morgan Stanley: Safeguard Duty a Short-Term Positive, But No Trigger for Price Hikes

Morgan Stanley believes the government’s decision to impose a 12% safeguard duty on steel imports is a welcome development, helping clear months of uncertainty around potential trade protection measures.

While the announcement could drive a short-lived rally in steel stocks, the brokerage advises using any such bounce to pare down positions. “The imposition removes a key overhang, and some positive near-term reaction is likely,” it noted.

However, from a pricing standpoint, Morgan Stanley remains cautious. Domestic hot-rolled coil (HRC) prices are currently trading at an 18% premium to import parity. Even after factoring in the new safeguard duty, domestic steel continues to trade at a 5% 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 note added, suggesting that the market is unlikely to see a structural uplift in earnings purely on the back of this policy shift.

The safeguard duty, effective from April 21 for a period of 200 days, applies to flat-rolled products of non-alloy and certain alloy steels. It aims to shield domestic producers from a sudden surge in cheap imports, particularly from countries like China. It comes at a time when global trade frictions — such as the US imposing tariffs on Chinese goods — raise the risk of excess Chinese steel being diverted to markets like India.

READ MORE: Metal stocks trade higher after govt imposes 12% safeguard duty on steel imports