The Government’s decision to withdraw the 15 per cent export duty on steel products may help make Indian steel products more competitive in the export markets, even as steel prices have corrected sharply and there are concerns about a demand slowdown.

 

JSW Steel, which derives a segment of its revenues from export of semi-finished steel, may be a beneficiary from this cut.

 

Duties were levied on steel exports in April this year to shore up domestic supplies and help tame inflation.

 

Some benefit

The move to withdraw export duty on semi-finished steel products, while leaving out scrap, ensures that value-added products continue to be exported. The duty has been withdrawn on products such as pig iron, iron and steel ingots, bars, rods, angles, shapes and sections.

 

The move may trim the duty outgo for companies such as JSW Steel, which plans to export 15-20 per cent of its output as semi-finished steel during the next 12 months. The scrapping of export duty is unlikely to impact SAIL, Tata Steel and Jindal Steel and Power Ltd.

 

Timing

The cut in duty comes at a time when global steel prices have corrected by about 20 per cent in six months, casting a shadow on the earnings prospects for major producers over the next few months. Some of the domestic steel producers have recently reduced the prices of their products by up to Rs 6,000 a tonne, to guard against cheaper imports from China and Ukraine.

 

Iron ore rejig

The 15 per cent ad valorem duty on iron ore fines has been replaced with a specific duty of Rs 200 a tonne. While the move may benefit miner Sesa Goa, the duty rejig with respect to iron ore fines is unlikely to benefit the steel industry. This is because there has been such a correction in iron ore prices that an ad-valorem duty would have worked out better for the steel industry, rather than the specific duty proposed now. –Business Line