Reports suggest the government may consider raising import duty on long and flat steel products by 2.5-3%
Shares of steel companies spiked up to 7% on Tuesday following reports the finance ministry may consider levying safeguard duty on import of long and flat steel products.
JSW Steel was the top gainer among large steel companies, with 7% gains. Trade volume rose to more than 13.24 lakh shares, twice the 30-day average volume of 6.62 lakh shares on the BSE and NSE.
Tata Steel rose 3.4% while JSPL advanced 2.5% lifting the metal index over 2.5%. The BSE Metal index was top sectoral gainer and ended at 8855.79, up 230.82 points.
The government is likely to raise import tax by 2.5-3% on long and flat steel products, according to reports. If implemented, this would be the second hike since in three months. In June 2015, the government raised import duty to 10% from 7.5% on flat steel and to 7.5% from 5% for long steel products to stem the flood of imports.
Among small and medium steel companies, Usha Martin surged 3% while Mukand rose more than 4%. Bedmutha Industries, Technocraft Industries and Elctrosteel Steels advanced close to 1% each.
Industry experts and analysts said that excess production by China coupled with weak demand in European markets has resulted in the fall of margins for steel companies. An industry analysis by British multinational bank HSBC observed a 50%-fall in operating income of Indian steel companies. While Indian steel companies have invested over $12 billion in new capacities, imports have steadily risen, it said.
“The bank debt to steel companies in India crossed $50 billion.It might become a concern for the banking system, if the steel sector is not resilient. We believe Indian companies might continue to hurt for a while,” said Jigar Mistry, analyst, HSBC (India) in an investor note published June 30.