Export duty rollback to boost local steel companies.
The government's decision to withdraw export duty on certain steel products and critical raw materials may bring some respite to domestic steel producers, facing pressure on profitability due to high energy costs, declining steel prices as well as muted demand, it is said.
Analysts added that globally competitive Indian manufacturers might also benefit in the export markets.
"It will be a big sentimental booster to revive steel demand, particularly when global steel demand is on a steep decline," it is said.
Even though global demand is softening, a pickup in exports will support steel prices in the domestic market, and the export of value-added products will add to the profitability of manufacturers, it is said.
In May, the government imposed an export duty to rein in rising steel prices in India. Prices of commodities like steel had surged due to supply disruptions in the wake of the Russia-Ukraine war but have plummeted. Rising interest rates raised concerns about an impending global recession. Demand from China, the world's largest consumer of commodities, also fell following a massive crisis in the realty sector and covid-led lockdowns across regions.
"Removing export duties on steel imposed six months ago is a timely decision. The global economy is slowing, bringing down the steel demand," it is said.
According to analysts, the Indian steel industry is well-placed to increase exports in a price-sensitive global commodity environment. It is said that Tata Steel, JSW Steel, and Jindal Steel and Power are set to benefit from this decision. The trigger for the decision might be the 16.7% contraction in exports in October. Unless exports pick up, India may not achieve the growth rate in gross domestic product for FY23 and FY24. This could be the macroeconomic significance of this decision, it is said.
"We welcome the government's decision, as this is a progressive step towards reviving the entire steel industry," Brij Bhushan, vice chairman and managing director of Shyam Metalics and Energy, it is said. The imposition of export duty by the Centre was to curb inflation and boost domestic availability. "The industry was hoping for this change as it did increase the uncertainty in the overseas market."