India's steel sector outlook upgraded on new safeguard duty: ICICI Sec

ICICI Securities has upgraded its outlook on India's steel sector after the government imposed a three-year safeguard duty on flat steel imports, a move expected to significantly improve domestic pricing power and profitability for major players.

ICICI Securities has upgraded its outlook on India's steel sector after the government imposed a three-year safeguard duty on most flat steel imports, a move expected to significantly improve domestic pricing power and profitability.

Improved Profitability and Pricing Power

In its latest sector update, the brokerage firm said it has raised the Financial Year 2027 and Financial Year 2028 Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) estimates for steelmakers by 3-10%, citing expectations of higher-for-longer domestic steel prices following the safeguard duty. The duty, levied at 12% in the first year, will taper marginally over the next two years.

Domestic hot-rolled coil (HRC) prices have already climbed 6% since early December, and ICICI Securities expects further upside of 4-5% in the near term, supported by a sharp reduction in low-cost imports. With nearly 70% of flat steel imports now covered under the safeguard, domestic prices are likely to trade at a minimum 10% premium to global prices for the next two-and-a-half years, the report said.

Key Beneficiaries and Stock Outlook

ICICI Securities noted that EBITDA per tonne for spot steel has already risen by Rs 2,500-3,000, with a sharper improvement expected from Q4FY26 onwards, following a weak third quarter. Among listed players, the brokerage sees JSW Steel and Tata Steel as the strongest beneficiaries due to their higher exposure to flat steel products. Jindal Steel is also well-positioned, with the safeguard coinciding with its recent expansion into flat products. While SAIL stands to gain from margin expansion, its lower flat product mix makes it a relatively smaller beneficiary.

Reflecting the improved outlook, ICICI Securities raised target prices for several stocks and reiterated its preference for Tata Steel and Jindal Steel, citing a favourable balance between earnings upside and valuations.

Downstream Player Impact

The brokerage added that downstream players such as APL Apollo could also see indirect benefits through restocking gains and inventory-led margin expansion as steel prices firm up across the value chain.

Government's Safeguard Duty Notification

On Wednesday, government has imposed a safeguard duty on certain non-alloy and alloy steel flat products to protect the domestic steel industry from a sharp rise in imports. The notification said the decision follows an investigation by the Director General (Trade Remedies) (DGTR), which found that imports of specific steel products had increased in a "recent, sudden, sharp and significant" manner, causing and threatening serious injury to domestic producers.

It stated, "The Central Government after considering the said findings of the Director General (Trade Remedies), hereby imposes on the subject goods falling under tariff headings 7208, 7209, 7210, 7211, 7212, 7225 and 7226 of the First Schedule to the Customs Tariff Act, when imported into India." (ANI)

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