Steel stocks firm after export duty removal: GPIL, SAIL climb up to 19%

Shares of steel companies were firm in an otherwise weak market as they surged up to 19 per cent in Monday’s intra-day trade. This upmove comes after the government removed export duty on steel products and raw materials after almost six months.

According to the notification, exports of iron ore lumps, which comprises of less than 58 per cent Fe and iron ore pellets will attract no export duty, however, grades above 58 per cent will attract 30 per cent.

Meanwhile, the 15 per cent export duty on hot-rolled, cold-rolled alloy and non-alloy flat steel products of 600mm or more has been withdrawn. The ministry of finance statement said that the current measures would provide a fillip to the domestic steel industry and boost exports. The move came as a major relief to the steel industry that has lined up a massive capacity expansion plan. CLICK HERE FOR FULL REPORT

Following the notification, stocks of Godawari Power & Ispat (GPIL), Prakash Industries, Jindal Stainless, Sarda Energy & Minerals, Jindal Stainless (Hisar), NMDC and Steel Authority of India (SAIL) gained more than 3 per cent on the BSE. In comparison, the S&P BSE Sensex was down 0.82 per cent at 61,151 at 10:45 am.

Among the individual stocks, GPIL soared 19 per cent to Rs 323.80 per share, on the back of heavy volumes. The average trading volumes on the counter jumped over seven-fold as around 4.5 million shares changed hands on the NSE and BSE.

GPIL is engaged in iron and steel industry, power sector and mining sector. It has an integrated steel manufacturing unit with facilities ranging right from captive iron ore mining to production of iron ore pellets, sponge iron, steel billets, rolled products, wires, ferro alloys and captive power plant.

According to analysts at ICICI Securities, the removal of export duty augurs well for domestic steel players over a longer term horizon.

The global steel demand has turned subdued since May 2022, which has put downward pressure on steel prices. As steel prices in the global market are currently muted, the export volumes are likely to pick up notably only when global prices recover, believe analysts.

However, the recent step of removal of export duty on steel products does provide an opportunity for domestic players to enhance their export volume notably as and when the global steel prices strengthens. While analysts do not expect a major uptick in domestic steel prices, they do believe a significant sector headwind has been removed.

“With respect to stainless steel players, we revise our EBITDA/tonne estimate for Jindal Stainless and Jindal Stainless (Hisar). We maintain our 'BUY' rating on Jindal Stainless and Jindal Stainless (Hisar) and upgrade Tata Steel and NMDC from 'HOLD' to 'BUY'. We continue to maintain our 'HOLD' rating on JSW Steel and SAIL,” the brokerage firm said.