Steel import safeguard duty extended; local prices may not jump

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The government on Wednesday extended the safeguard duty on steel imports till March 2018. The government had first imposed in September last year. There will be no safeguard duty on steel imported at or above the Minimum Import Price stipulated by the government. Following will be the duty structure *20 percent ad valorem minus anti-dumping duty payable for imports between September 2015 and September 2016 *18 percent ad valorem minus anti-dumping duty payable for imports between Septemver 2016 and March 2017 *15 ad valorem minus anti-dumping duty payable for imports between March 2017 and September 2017 *10 percent ad valorem minus anti-dumping duty for imports between September 2017 and March 18 The steep fall in steel prices over the last year, and dumping by rival countries has hurt the financial health of Indian steel makers. Many companies are now struggling to repay bank loans and this has added to the pile of non-performing assets (NPAs) in the banking system. Industry watchers say duty restrictions will protect Indian steel makers from the onslaught of dumping by its South East Asian competitors to some extent. However, only efficiency improvements can help the industry in the longer run, they say. Broking firm Jefferies said in a note earlier this week that it expect domestic steel prices to rise further near term as imports fade post March due to the imposition of MIP. And while extension of safeguard duty could increase headroom for price hikes, domestic steel fundamentals may not support steep price hikes, the broking firm said. “We expect prices (+10-14 percent post MIP) to rise further near term as imports taper off,” the Jefferies note said, adding, “But, domestic demand supply fundamentals are not strong enough (demand growth 4.7 percent in Feb, new capacities) to support large price hikes, going forward in our view.”