Export duty on steel to stay, claim sources; duty revisions to impact exports negatively by 35-40%, says Crisil

In a big jolt for steel stocks and the sector in general, it is learnt that the government has denied removing or slashing export duty that it imposed on select steel products. 

As per Zee Business report, the sources related to the matter confirmed that the government has no plan to recall or slash 15% import duty on steel. The 15% export duty is expected to remain on steel products until prices do not cool down," it said. 

#ZBizExclusive | स्टील कंपनियों के लिए निगेटिव खबर

सरकार की एक्सपोर्ट ड्यूटी को वापस लेने की योजना नहीं
कीमतों में और गिरावट के बाद ही विचार संभव
पिछले हफ्ते ड्यूटी हटाने के लिए इंडस्ट्री की FM से मुलाकात

जानिए पूरी डिटेल्स तरूण शर्मा से..@talktotarun @AnilSinghvi_ pic.twitter.com/Qn9A0HaCly

— Zee Business (@ZeeBusiness) June 21, 2022

After the government imposed export duty on select steel products in view of rising prices, a report from Crisil Research analysis has claimed that India’s steel exports will take a massive hit due to the government's decision.  

What does Crisil report says?

"Steel exports will drop 35-40% on-year to 10-12 million tonne this fiscal following the 15% export duty imposed on several finished steel products last month," said CRISIL. 

Steel exports, which had reached a record high of ~18.3 million tonne last fiscal, continues to see momentum because of the disruption caused by the ongoing Russia-Ukraine conflict, it said.  Russia is a key exporter of steel, coking coal and pig iron.  

In addition, the European Union’s (EU) move to raise India’s export quota – amid a widening differential between steel prices in the two geographies – benefited domestic steel makers, and limited the impact of a 25% tariff on steel imports imposed by the EU.

“The duty-driven price correction will improve availability of steel in the domestic market as finished steel exports dwindle. This will directly impact India’s export volume in the current fiscal. Steelmakers will attempt to skirt the duties by bumping up exports of alloyed steel and billets, but that is unlikely to compensate for the loss of finished steel exports,” said Hetal Gandhi, Director, CRISIL Research.

What does it mean for steel, other sectors?  

Reacting on steel exports impact, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said domestic steel prices have crashed nearly 20 percent recently from the peak, following the excess supply in the market caused by the imposition of a 15% export duty. 

"Unless this decision is reversed, steel exports are likely to take a hit of nearly 35 percent. This will also severely impact the profitability of the steel sector, which is reflecting in the prices of steel stocks which have taken a big hit," he said.  

However, the positive side is that steel consumers, notably in the automobile and construction sectors will gain from this steep decline in prices, the expert added