Global credit rating agency Moody's has said that the imposition of a safeguard duty on certain categories of hot-rolled coil steel imported into the country is credit positive for Indian steel producers because the duty will support domestic steel prices, improve producers profitability and their leverage metrics.
Moody's Investors Service in its report said that domestic prices fell 25 percent between June 2014 and June 2015 owing to a 57 percent increase in cheaper imports, one third of which came from China, adding that the safeguard duty and a depreciating rupee will provide a stabilising impact on domestic prices and demand-supply equations. It added that the weak rupee makes steel imports more expensive and therefore, helps domestic steel producers indirectly.
The report further highlighted that surging imports, especially from China, South Korea and Japan, have resulted in an imbalance between the supply and demand of steel in India and led to a sharp drop in prices. Earlier the government had announced a 20% safeguard duty on hot-rolled flat products of non-alloy and other alloy steel, in coils of a width of 600 mm or more, effective September 14 and levied for 200 days. The levy will be applicable uniformly to the aforesaid category of steel imported from all countries, even the ones with whom India has an FTA (free trade agreement).