Steel Stocks Rally: JSW Steel, Tata Steel, Hindalco, SAIL Jump Over Probe On Soaring Steel Imports; BUY?

The shares of Indian steel companies surged on December 23 as the Directorate General of Trade Remedies (DGTR) initiated a probe into the alleged surge in steel imports. The investigation follows a complaint filed by the Indian Steel Association, which has raised concerns about the "recent, sudden, sharp, and significant" increase in steel flat product imports, claiming it has caused harm to the domestic steel industry.

Steel Stocks Rally

The market reacted positively to the news, with shares of major steelmakers rallying during early trade.
JSW Steel jumped nearly 4% to an intraday high of Rs 950.95.
Jindal Steel & Power rose nearly 4% to an intraday high of Rs 947.50.
Steel Authority of India Ltd. (SAIL) gained nearly 4% hitting an intraday high of Rs 120.47.
Tata Steel gained 2% to Rs 143.80.
These gains helped lift the Nifty Metal Index by over 1% during morning trade, reflecting investor optimism about potential protective measures for the domestic steel sector.

What Sparked Investigation?

The Indian Steel Association's complaint alleges a sharp rise in steel imports, particularly flat products, which has severely impacted the domestic industry. The DGTR's notification acknowledges these concerns and indicates that it will evaluate whether safeguard measures are necessary to counter the surge.

The investigation will analyze steel imports between October 2023 and September 2024, assessing whether the domestic industry has suffered "significant injury" due to the influx of low-cost imports.

Industry insiders suggest that the DGTR could impose a temporary safeguard duty of up to 25% based on initial findings, even before the final report is released. The safeguard duty, if implemented, would aim to protect Indian steelmakers from the adverse effects of excessive imports.

Steel Minister HD Kumaraswamy had earlier hinted at the possibility of such a measure, citing concerns over the growing volume of cheap steel imports, particularly from China. Recent government data revealed that India's finished steel imports from China reached an all-time high during the first eight months of the fiscal year.

Broader Implications

The imposition of a safeguard duty could have significant ramifications for the Indian steel industry.
Domestic Boost: By curbing cheaper imports, domestic steelmakers like JSW Steel, Tata Steel, Jindal Steel & Power, and SAIL would likely see increased demand for their products.
Investor Sentiment: The anticipation of protective measures has already lifted investor confidence, as evidenced by the rally in steel stocks.

Brokerage firm Investec identified JSW Steel and Tata Steel as the biggest beneficiaries of the safeguard duty, noting their strong market positions and exposure to import competition. However, it also emphasized the need to monitor the effectiveness of these measures.

The government has been mulling various protective measures to shield the domestic steel industry from the fallout of global overcapacity, particularly in China. Earlier this month, discussions were held about imposing a 20% safeguard duty, citing concerns over steel overcapacity in China and the potential impact of US tariffs on the alloy.

This is not the first instance of protective action. In the past, India has imposed anti-dumping duties to counter the influx of cheap steel imports. The applicant has requested provisional measures, citing "critical circumstances" and urging the government to impose the safeguard duty for four years.