Steel stocks rally: Tata Steel, JSW Steel lead as DGTR probes surge in imports

Shares of Tata Steel and JSW Steel surged on December 23 after the Directorate General of Trade Remedies (DGTR) initiated an investigation into the rising imports of non-alloy and alloy steel flat products into India. This comes in response to a complaint by the Indian Steel Association, alleging a sudden and significant increase in imports, adversely impacting the domestic steel industry.

Stock performance and targets
JSW Steel climbed 3.21 percent to hit Rs 947.95, while Tata Steel gained 2.09 per cent, reaching Rs 143.80. Other steel stocks like SAIL and Jindal Steel & Power also witnessed gains of up to 3.2 per cent. Analysts are optimistic about these stocks, with brokerages maintaining a 'Buy' rating. JSW Steel is expected to reach Rs 1,085, while Tata Steel has a target price of Rs 190.

Potential impact of safeguard duty
The DGTR probe is set to assess imports from October 2023 to September 2024. If safeguard duties are imposed, they could curb cheaper imports and improve domestic steel prices and margins. The duty, requested for a four-year period, would likely offer structural relief to Indian steelmakers, benefiting major players like JSW Steel and Tata Steel.

Industry-wide implications
The investigation focuses on steel products used in key sectors such as construction, capital goods, and automotive industries. The products under consideration include hot rolled coils, sheets and plates, cold rolled sheets, and metallic-coated steel products. A safeguard duty is expected to reduce import bookings and encourage channel restocking, positively influencing flat steel prices, currently at multi-year lows.

Government’s protective measures
The Indian government has been exploring measures like a twenty per cent safeguard duty to protect domestic steelmakers from overcapacity in China and other global pressures. This probe underscores the administration’s commitment to shielding the sector from adverse external impacts.

With the DGTR probe and potential safeguard duties on the horizon, steel stocks are poised to remain in focus, making them a hot pick for investors.