India’s increase in steel import duties will ease downward pressure on domestic prices from cheaper China-origin imports, according to Moody’s. Higher realised prices as a result of the duty are seen helping reverse weakening profits at some Indian steelmakers.

Last week India’s government hiked import duties on long and flat products each by 2.5% (see Kallanish 18 June). Imports of bars/rods are now levied with a 7.5% tariff, while hot and cold rolled coil, galvanized coil and plate imports incur a 10% duty. The steel ministry had for months been pressing the finance ministry to increase steel import duties in order to stem an influx of steel from East Asia.

The new duties “…will support Indian steel prices and contribute to Indian steel producers’ profitability,” Moody’s says in a report. Indian steel prices have dropped 27% over the past 12 months owing to a 70% increase in cheaper imports, one third of which came from China. “Higher realised steel prices will help reverse weakening profits at [... Tata Steel and JSW Steel] for the six months to 31 March 2015,” the credit rating agency continues.

Moody’s expects Tata Steel’s ebitda/tonne to reach $190-210 over the next six months from $132 in the six months through March, as it draws down its inventory of expensive iron ore and returns to using its captive supply. However, India’s recent mining law amendment will increase the royalties Tata pays on its captive mines, which will keep its profitability below the highs of $250-300/t. Profitability at JSW Steel, which buys externally all of its iron ore need, will more directly reflect the increase in realised prices.

Worldsteel expects Indian apparent steel demand to grow by 6.2% on-year in 2015 and 7.3% in 2016, compared with a decline in all other large emerging countries except Turkey. “Although Indian steel demand is poised to outpace other emerging markets, competition from imported steel is likely to remain strong, keeping some pressure on Indian steel prices,” Moody’s concludes.