Tata Steel, SAIL, Jindal Steel shares tumble up to 16% after the export tax shocker
- Shares of India’s largest steel companies,
Tata Steel, SAIL, Jindal Steel among others, tumbled up to 16% after the Indian government imposed export taxes overnight.
- The Indian steel makers currently have over 2 million tonnes of steel orders in the pipeline, said industry body FICCI.
- India ran a trade surplus of nearly ₹1.07 lakh crore in the two years after the outbreak of the COVID-19 pandemic.
This could prove to be a double whammy for steel companies as the domestic demand for steel has been tepid. They were hoping to supplant it with exports, and with the extra taxes for exporting, will slash their margins if not businesses.
Indian stock markets reacted sharply to the news, with Tata Steel, SAIL, Jindal Steel and Power (JSPL), and JSW Steel all tumbling by up to 15%. As of 11 a.m.,
The steel makers are more worried about the execution of ongoing orders which could be in a fix due to the unexpected move by the government.
“They should have given us at least 2-3 months of time, we did not know about such a substantial policy. This could possibly lead to force majeures. We alone have 2.6 lakh tonnes of orders, which were taken when export duty was zero,” said V R Sharma, managing director of Jindal Steel and Power, in an interview with Reuters.
The iron and steel product category has witnessed a net trade surplus in the last two years – since the outbreak of COVID-19 – with the total surplus standing at $14.1 billion (approx. ₹1,07,000 crore) in 2020-21 and 2021-22.
India’s iron and steel imports, in the same period, came down from 3.6% of the total imports to only 2.1%, according to a report by Motilal Oswal.
“In a bid to curb inflation the Ministry of Finance announced export duties on most steel products, along with an excise duty cut for petrol and diesel. This is likely to divert more supply towards the domestic market. With prices now being guided by the export parity philosophy (instead of import parity) it could lead to a sharp correction in steel prices in India,” said a report by CLSA.
It downgraded Tata Steel from ‘Buy’ to ‘Underperform’; JSW from ‘Underperform’ to ‘Sell’, and JSPL from ‘Buy’ to ‘Overperfrom’.
$NIFTYMETAL.NSE has pinched low at multiple weeks support!! A negative divergence of Price with MACD and RSI on weekly chart frame is a worrisome. Trading below 5189 would trigger a sell-off by investors who have earned on rally from 1400 since Pandemic. Stay cautious on metal stocks!— (@Kushghodasara) May 23, 2022
Over 2 million tonnes of steel orders in the pipeline, says steel industry
Industry body FICCI (Federation of Indian Chambers of Commerce & Industry) has sought 3 months’ time from the Indian government to clear orders amounting to over 2 million tonnes of steel.
The FICCI Steel committee co-chairperson Sharma, who is also the MD of JSPL, said that the ongoing Russia-Ukraine war has given an opportunity to Indian steel companies to fill in the demand for steel in Europe, which is the second largest importer in the world.
Xiaomi and Leica partner for a flagship device, Xiaomi 12 Ultra expected to launch in July
Zomato, HDFC, HDFC Bank, Paytm and other hot stocks to watch out for on May 23
WhatsApp will end support for iOS 10 and iOS 11 from October onwards
- Towards a Greener Footprint: Prioritising Carbon-Neutrality Makes Good Businesses Sense! Are Indian Firms Making the Transition?
- Netflix confirms an ad supported tier is coming to its streaming service by year end
- Accenture, Cognizant could see revenue growth but a strong US dollar could spoil the party
- Kharif sowing is off to a weak start with extended dry spells and floods
- Best ladder for home use in India