Metal stocks plunge in trade today; here's why
Issued at 2022-05-25
Export duty has been levied on all major steel products including stainless steel and pig iron at the rate of 15%. A decrease in export duty will mean that domestic realisations will now be higher than export realisations. International Steel prices could sustain higher. Declining steel prices will be positive for steel-consuming sectors.
New Delhi: Export duty has been levied on all major steel products including stainless steel and pig iron at the rate of 15%. For iron ore, export duty has been increased from 30% to 50% & for pellets, it has been imposed at the rate of 45%. Import duty on key raw materials of steel (coking coal, peat coal) & stainless steel (Nickle) has also been slashed. However, this would lead to a benefit of just Rs 800-900/tonne. Hence, the negatives will overweigh the positives.
A decrease in export duty will mean that domestic realisations will now be higher than export realisations. Hence, mills will now want to sell their products domestically than in international markets. Higher supply will lead to a reduction in prices. Lower prices ultimately impact the profitability of these companies.
The recent changes, however, will be more beneficial for non-integrated players. Iron ore prices will fall due to export duty and cooking coal prices will fall due to a reduction in import duty.
But, International Steel prices could sustain higher. Because India represents around 5% of sea trade. The absence of Indian steel could lead to a shortage in global supply. Higher steel prices could as a result sustained globally.
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