Tata Steel, JSW Steel To Benefit Most If Industry's Appeal Implemented As DGTR Starts Probe, Says Investec

Tata Steel and JSW Steel will reap the most benefits if Indian Steel Association's appeal asking for provisional measures and tariffs for 4 years is accepted, Investec indicated in a report after the Director General of Trade Remedies started its investigation.

"Factoring, current product mix, debt as % of EV, CF (cold-finished) benefit over FY26-27, we expect TATA/JSTL to reap the most gains," Investec indicated.

On Friday, India's Directorate General of Trade Remedies initiated an investigation into whether a safeguard duty needs to be imposed after domestic steelmakers complained of an increase in imports of certain steel flat products into the country.

This comes after the Indian Steel Association filed a complaint with the DGTR alleging a "recent, sudden, sharp and significant increase in imports" which has caused "injury to the domestic industry."

The brokerage said that if duty is actually imposed as proposed on countries contributing more than 3% of import volumes over the investigation period, it reduces scope of circumvention.

According to the brokerage, existing domestic hot rolled coil prices command 5% premium vs import prices. "If for 25% tariff, domestic HRC pricing will be 16% discount to import pricing giving domestic mills more leeway to price hike," Investec added.

However, effectiveness remains a concern for the brokerage given innovation around imports, wherein traders/importers often added boron to switch to other HSN codes. "If for implementation of stated tariffs, on all countries whose import volume contribution is more than 3% over the duration of investigation period, it could imply several SEA countries could also be included thereby limiting the scope of circumvention and increasing effectiveness of tariffs," it said.

Investec also said that learnings from implementation of these safeguard duties in September 2015 led to 40% decline in imports in subsequent year and stayed range-bound until the validity of tariffs. "Consequently, mills enjoyed better pricing/spread," the brokerage said.

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