Metals, Mining Sector Update – Duty Relief, A Respite, But Not A Bloom: ICICI Securities


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We believe the Government of India’s decision to roll back the duties imposed on ferrous and stainless steel products in May-22 is a welcome step.

However, due to the falling steel demand and low prices, globally, the benefits are likely to be marginal. Key points:

  1. exports margin/volume is likely to improve;

  2. domestic price hikes may remain muted in view of adverse import parity;

  3. margins across secondary steel value chain may improve, resulting in iron ore prices bottoming out; and

  4. stainless steel players are likely to benefit.

Overall, while domestic steel prices are unlikely to increase substantially, we believe a significant sector headwind has been removed. That said, the street would be wary of the likely imposition of duties in future, if prices are sharply up.

We perceive the event to be a sector re-rating, and hence, raise the valuation multiples of all ferrous stocks under our coverage by 10%- corresponding to similar profitability level, as pre-export duty.

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