Metal stocks fell on Monday after US President Donald Trump announced his intent last week to levy hefty tariffs on imported steel and aluminum to protect the local industry. President Trump said last Thursday that the US would impose would impose tariffs of 25% on steel and 10% on aluminum imports. The order is due to be formally signed this week.
Indian stock markets, which were closed for trading since Friday due to Holi festival, saw stocks react sharply on Monday to the move. The BSE metal index slid 3.3% to end the session at 14,534.31. All the constituents of the index ended the session in the red. The stock of state-owned metals & mining major, NMDC, which has significant exports, declined the most among the index constituents to close 5.85% lower at Rs 123.05.
Stocks of National Aluminium Company, JSW Steel, Jindal Steel and Hindalco declined more than 4%. Tata Steel fell by 2.95% to close the session at Rs 655.35. Tata Steel was the second-worst performing stock in the Sensex.
Kotak Institutional Equities, in a note to investors, said it estimates that steel exports to the US by other countries can decline by 9-14 million tonne (mt) due to the imposition of higher import duties and ramp-up in its domestic steel mill utilisation rates by 80-85% from 72% at present. The note added that India exported close to 0.9 mt of steel to the US in 2017.
“The US trade protection measures will lead to temporary disruption in few regional markets as new trade channels will open to cater to supplies left behind from being exported to the US. However, we believe the extent of steel-mill/aluminum smelter restarts in the US will not be meaningful to disrupt the outlook on global aluminum and steel over the medium to longer term,” the note added.
Market participants said the move would not have much impact on Indian steel companies but warned of severe repercussions for international markets if the step were to be implemented.
“I don’t think there will be any effect. Steel in India is a domestic story. Indian steel industry has revived in the last one-and-a-half years. But that’s not because of exports but because of curtailment of imports. I don’t think this announcement does anything to change that even if it is implemented. Today was just a sentiment thing. Today steel was not in the good books of the market,” said Shankar Sharma co-founder and chief global strategist, First Global. “If it is finally implemented it will not be good for markets 100%. But I doubt it will get implemented. It is a far sweeping thing to get implemented,” he added.