Indian steelmakers stand to gain higher prices after China tweaked its import and export levies on steel, signalling that the world’s largest consumer of the alloy is willing to import more to meet its growing requirement.
China cut import tariffs on steel to nil. And India’s neighbour removed a rebate of 13% on value-added tax it offered on exports of 146 steel items from May 1, according to Chinese Ministry of Finance. The rebate is now applicable on 28% of China’s steel exports versus 98% earlier.
The reduction in rebate is higher than the industry expected. Mysteel Global, an online pricing and intelligence service, said based on recent sales contracts, steel exporters were anticipating a 400-basis-point cut 9%.
Steel stocks surged after the development. JSW Steel Ltd. shares rose as much as 9.2%, and is headed for its biggest single-day gain in a year. Tata Steel Ltd., Steel Authority of India Ltd. and Jindal Steel and Power Ltd. rose 2-6% compared with 0.40% gain in benchmark Nifty 50.
Credit Suisse suggests that export prices for Indian steelmakers have already risen in anticipation of this move and expects them to remain at elevated level. Much of the impact is priced in, it said.
JPMorgan expects domestic hot rolled coil prices to rise by more than Rs 6,000-7,000 a tonne in the next two months since there is a large gap between mill level and market price.
Kotak Institutional Securities, too, expects prices to rise.