The government’s decision to lower export duties on iron and steel products is unlikely to provide a significant boost to the country’s listed steel makers as global demand for steel has collapsed, limiting export opportunities, industry experts said.

There is also concern in the industry that any large increase in steel prices could lead the government to reconsider export duties, they said.

However, the rollback of duties could lead to some sentimental impetus and have slightly revised upward price targets around 10%-15% across steel firms such as JSW Steel, Jindal Steel and Power, analysts said.

Furthermore, low inventory in the system can provide short-term support.

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The price targets for Tata Steel and SAIL shares have not seen any significant revision after the return of export duties.

The duties were introduced in May this year when steel prices in India and globally hit record highs, enabling lucrative export opportunities. But the situation has changed drastically since then.

The World Steel Association (WSA) has sharply cut its 2022 and 2023 demand forecasts in all regions including India. The only exceptions are the Middle East and Africa.

The new global steel demand growth forecast has been revised down to -2.2% for 2022. The sharpest decline in demand is expected in Europe and the UK, where Tata Steel has substantial exposure through its European operations.

To illustrate, in May, Indian (hot rolled) steel prices were above ₹70,000 per tonne and European steel prices were around $1,000 (nearly ₹77,000) per tonne. Premiums in foreign markets allow for export opportunities and higher volumes for domestic steel producers.

By contrast, currently, Indian prices are at ₹55,000 per tonne, down 20-22%, while European steel prices are down more than 40% to $600, or around ₹49,000, per tonne.

Furthermore, according to industry trackers, China prices fell 30% in the period. Thus, exporting steel may be less profitable for domestic producers.

On Friday, share prices of all four major steel producers – Tata Steel, JSW Steel, Jindal Steel and Power, and SAIL – remained flat compared to the previous day’s close.



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