Steel safeguard duty to improve domestic companies' profits: Moody's

KOLKATA: Safeguard duty on certain categories of hot rolled coil steel imported into the country is credit positive for Indian steel producers, like Tata Steel and JSW Steel. The duty will support domestic steel prices, improve profitability of producers, a Moody’s report has said. The 20% duty, announced on September 14, 2015, came into immediate effect and will be levied for 200 days. The report said more importantly, the duty will be levied uniformly for the category of steel imported from all countries, even with the ones India has an FTA (Free Trade Agreement). For our rated entities in India, Tata Steel and JSW Steel, the safeguard duty is credit positive as it staves off some of the downward pressure on their realizations caused by cheap imports, the report said.

In the quarter ended June 30, 2015, imports led to a 11% decline in realised price per tonne at Tata Steel’s India operations versus a year earlier. The safeguard duty and a depreciating INR will provide stabilizing impact on domestic prices and demand-supply equations, although the extent of price increase may vary and fall short of the duty imposed. Higher realized prices will help reverse weakening profits at Tata Steel India and JSW Steel, the report added. Domestic steel prices fell 25$ between June 2014 and June 2015, owing to a 57% increase in imports , one third of which came from China.