Nomura bullish on Indian steel industry; maintains 'Buy' on JSW Steel, JSPL

Nomura on Indian steel industry: Tokyo, Japan-based brokerage Nomura has a positive outlook for India's steel sector, maintaining a 'Buy' rating on major players like JSW Steel and Jindal Steel & Power Limited (JSPL), driven by the expectation of rising steel prices and favourable policy developments. 

 

Nomura has set a target price of Rs 1,220 and Rs 1,080 for JSW Steel and JSPL, respectively.

 

On the bourses, JSW Steel and JSPL shares have jumped about 3 per cent and 8 per cent, respectively, in the past one month. Meanwhile, the Nifty Metal Index also rose about 3.5 per cent during the same period.

 

 

Nomura analyst Jashandeep Singh Chadha noted that domestic hot-rolled coil (HRC) prices across India have increased by up to Rs 1,600 per tonne week-on-week (W-o-W), to Rs 48,100-50,500 per tonne. The uptick can be attributed to a combination of material shortages and growing speculation surrounding the potential imposition of a safeguard duty.

 

The possibility of the safeguard duty, which is currently being investigated by India’s Ministry of Steel, he believes, has stirred the market. 

 

“Certain mills are looking to increase their list prices by Rs 1,500 per tonne but are waiting for clarity on the safeguard duty,” according to a report from BigMint. 

 

The Ministry had initiated an investigation in December 2024 to assess the damage caused to the domestic steel industry by a surge in imports. While the investigation may take up to six months, many industry experts anticipate the government may impose a provisional safeguard duty similar to the one enforced in FY16.

 

In FY16, during an anti-dumping investigation, the government imposed a 20 per cent safeguard duty on hot-rolled coil imports for a period of 200 days. When the investigation concluded, the duty was lifted, and an anti-dumping duty (ADD) was imposed on Chinese steel imports in FY17. Given this precedent, the current situation has many believing that a provisional safeguard duty could be applied in the short-term.

 

“The domestic steel industry is pushing for a 25 per cent safeguard duty, but we expect a 10-15 per cent duty,” said Nomura analyst. If the duty is set at 12 per cent, domestic steel prices could increase by around Rs 2,000-2,500 per tonne, as the landed price of imports would rise approximately Rs 4,000 per tonne. This would translate into higher incremental earnings before interest, taxes, depreciation and amortisation (Ebitda) per tonne for Indian steelmakers, particularly those like JSW Steel and JSPL, who are well-positioned to capitalise on this price hike.

 

What makes the safeguard duty more attractive than an anti-dumping duty is that it applies to all imports, including those from Free Trade Agreement (FTA) countries like Japan and South Korea, which together accounted for 51 per cent of India’s imports in CY24. In comparison, China’s share was 30 per cent. As the safeguard duty comes under the World Trade Organisation’s (WTO) provisions, it’s expected to be easier to impose and enforce, said analyst at Nomura.

 

The price dynamics of domestic iron ore also play into the broader steel industry’s outlook. 

 

While global iron ore prices have seen a 4 per cent increase this year due to supply disruptions from cyclones in Australia, domestic iron ore prices have remained stable at Rs 5,060 per tonne since January 2025. This has led to domestic iron ore trading at a discount of Rs 1,000-1,100 per tonne compared to import parity prices. 

 

The potential price hike in steel could allow domestic iron ore producers to increase their prices as well, though analysts note that the window for aggressive iron ore price hikes is short-lived. As global supplies from Australia recover, iron ore prices are expected to ease.

 

“If the safeguard duty is announced, we anticipate domestic iron ore producers will push for price hikes, potentially raising steel production costs for companies like JSW Steel and JSPL by Rs 1,000 per tonne,” said the analyst. For integrated steel producers like Tata Steel and SAIL, the situation is seen as more favourable, given their stronger positions in terms of iron ore sourcing.

 

That said, Nomura’s positive stance on the Indian steel sector reflects confidence that the safeguard duty, if imposed, could provide a major boost to domestic steel prices and company earnings. 

 

The safeguard duty, along with rising steel prices, Nomura believes, could position India’s steelmakers for solid growth in the coming months.