The domestic steel sector has been “hit by moving trains,” the ratings agency Icara said in response to the government’s tariff-related measures.
On Saturday, the government raised tariffs on iron ore exports by 50 percent and on some steel intermediaries by 15 percent. It has announced tariff waivers on some raw materials, including coking coal and ferunicle, used in the steel industry.
In a statement on Monday, ICRA said the steel industry had been “damaged by a moving train because the government cracked the whip and imposed export tariffs to rule at a higher price. It hit about 95 per cent of India’s finished steel export basket with 15 per cent export duty.” Domestic steel prices could potentially correct 10-15 percent in the coming months as demand enters the seasonally weak monsoon quarter, it noted.
Icra also said that many steelmakers’ expansion plans could be affected if they remain in the medium term, Jayant Roy, senior vice-president and group head, corporate sector rating, Icra, said in FY22, Indian mills recorded 25 per cent year-on-year steel exports. Increased year after year as they took advantage of rising prices at sea.
Europe, Vietnam and the Middle East were the three largest destinations for Indian steel exports, accounting for about 50 per cent of India’s total steel exports.
“We believe that many of these destinations will be less attractive now because the mills value the high tariff economy. In addition, the impact of the new export tariffs on steel exports to Europe will be relatively less severe, as steel export offers for supply in Europe are 10-11% higher than in competitive markets such as Southeast Asia and the Middle East. Which is the market in Southeast Asia and the Middle East, “he added.