Any safeguard measure for the Indian steel industry will boost prices and increase the margins of steelmakers, Nomura Research has said in a report issued on Friday, March 7.
It said that, while the Indian steel industry has sought a safeguard duty of 25 percent, the duty could be in range of 10-15 percent.
“Assuming a 12 percent duty, the landed prices will be INR 4,000/mt ($46/mt) higher than the domestic spot prices. We believe the industry would be able to take an INR 2,200-2,500/mt ($23-29/mt) price hike in that scenario,” Nomura Research said.
The safeguard duty would be a better option than antidumping duty, as it would be easier to impose and it targets all imports including those countries with free trade agreements, it said.
Further, any increase in steel prices might provide an opportunity for domestic iron ore producers to raise prices, the report said, adding, "We believe the price hike window is smaller for domestic producers, as, with supplies resuming from Australia, global iron ore prices will soon start easing".
Hence, Nomura expects aggressive iron ore price hikes following the announcement of the safeguard duty.
It added that a INR 600/mt ($7/mt) price hike in iron ore would result in a INR 1,000/mt ($11/mt) increase in the consumption cost for converters such as JSW Steel and Jindal Steel.
“Integrated players such as Tata Steel Ltd. and Steel Authority of India Ltd. would be better placed in such a scenario,” the research agency said.
