Duty cut could bring down domestic steel prices by 10%

New Delhi: Government's proposal to reduce import duty on steel products in Budget 2021-22 would make their imports more competitive and in turn exert near-term pricing pressures on domestic steelmakers, rating agency ICRA said. In its report on implications of duty changes on the steel industry, the agency, however, said that domestic steel demand may remain favourable in the coming months on the back of several positive announcements made in the Budget and this in turn is likely to keep domestic steel prices buoyant unless the international prices correct significantly from the current levels.

"The reduction in duties will not affect imports from countries like South Korea and Japan, with which India has a Free Trade Agreement (FTA). However, imports from China and other non-FTA countries would become more cost-competitive now.

Chinese export HRC prices have already witnessed a 10 per cent drop in January 2021 due to lower domestic demand during winter months of November-March, and at current prices, the landed HRC prices from China at new duty rates are trading at a 10 per cent discount to domestic HRC prices," said Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings, ICRA.

"Therefore, everything else remaining the same and considering the lead time of about two months for the imports to arrive at the Indian shores, domestic HRC prices could correct by up to 10 per cent by end-March 2021 to align with the international prices," he added.