December Price Hikes, Safeguard Duty Set To Support Indian Steel Margins, Says HSBC

HSBC Global Investment Research believes that the government’s decision to impose a three-year safeguard duty on flat steel imports addresses a key investor concern about downside risks to earnings for domestic steelmakers.

The Ministry of Steel has notified that the duty will be 12% in the first year, tapering to 11% by the third year, and will not apply if the imported HRC CIF price is above $675 per tonne. Investors had been worried about whether protection would continue after the provisional duty expired in November 2025.

According to HSBC, the latest announcement removes that uncertainty and is a long-term positive as it effectively provides a multi-year earnings floor at a time when most companies are embarking on large capex cycles. The safeguard duty applies to all countries, except developing countries, but excludes China, Vietnam and Nepal from that exemption.

The brokerage noted that domestic prices have already begun to firm up. Retail HRC prices have risen from Rs 45,800 per tonne at end-November to Rs 49,000 per tonne in December, as mills implemented two hikes totalling Rs 2,000 per tonne.

Based on current FOB prices of $470–480 per tonne, HSBC estimates implied landed prices after safeguard duty at Rs 57,241 per tonne for China and Rs 53,515 per tonne for Japan, suggesting domestic prices still trade at a meaningful discount. It expects further price hikes of Rs 1,500–2,000 per tonne in January.

HSBC said the safeguard duty effectively removes most of the earnings downgrade risk for now, especially given likely weak third quarter results and a $30 per tonne rise in coking coal prices since September 2025. However, meaningful earnings upgrades would require stronger regional price momentum alongside a decline in Chinese steel exports. While recent developments such as export licensing are positive signals, it said an actual fall in exports may still take time.

With a supportive global backdrop for metals, low investor positioning, and regulatory support through safeguard duty, HSBC believes Indian steel stocks could begin to catch up with base metal stocks in the period ahead.