FREE

MOSL: METALS/STEEL-Definitive duties recommended to protect domestic players-New challenges ahead

​Metals/Steel: Definitive duties recommended to protect domestic players; New challenges ahead; JSPL – our top steel pick

• Post investigations, the Director General of Anti-dumping and Allied Duties (DGAD) has concluded that the domestic steel industry has been battling a major injury due to rising volumes of cheap imports. It has thus recommended conversion of anti-dumping duties on hot-rolled coil (HRC) and cold-rolled coil (CRC) products to definitive duties. A similar action is likely in case of coated flat products.
  
• The move does not come as a surprise, but nevertheless improves the visibility on (1) protection against dumping of flat steel products from the seven countries with significant surplus production and (2) profitability of the Indian steel mills.
  
• Indian steel mills, however, have new challenges in the form of a sudden spike in coking coal prices and appreciation of the INR. The weakening global market will impact exports, while viability of imports has eroded pricing power for flat products.
  
• The Indian long product market has improved remarkably over past few months, which may be an early sign of demand pick-up (primarily driven by the construction segment).
  
• Jindal Steel & Power is our top pick among steel names, as (1) it is coming out of the worst cycle in all its businesses and (2) its volume growth prospects are strong. We maintain our Buy rating on JSW Steel and NMDC, and Sell rating on SAIL and Tata Steel.