US METAL IMPORT TARIFF WOES FOR INDUSTRY
Metal stocks bore the brunt of US President Donald Trump’s plans of levying a 25 per cent import tariff on steel and 10 per cent on aluminium.
The Nifty Metal index slipped 3.7 per cent during intra-day deals. In comparison, the Nifty50 index lost 1.2 per cent. Among individual stocks, NMDC, Jindal Steel, Jindal Stainless (Hisar), National Aluminium (Nalco), JSW Steel, and Steel Authority of India (SAIL) declined 4.6-6.4 per cent during the day.
Analysts at Kotak Institutional Equities estimate that steel exports to US by other countries can decline 9-14 million tonnes (mt) due to the imposition of higher import duties and ramp-up in its domestic steel mill utilisation rates by
80-85 per cent (from
72 per cent at present). However, this will not dent the fortunes of the steel and aluminium sectors, they said.
According to reports, the US produced 82 mt of steel in 2017 on capacity of 113 million tonnes per annum (mtpa) and imported 36 mt of the metal. The largest steel exporters to the US include Canada, Brazil, South Korea, Mexico, and Russia, which together account for around 60 per cent of exports to the US.
India exported close to 0.9 mt of steel to the US in 2017.
“We believe the disruption (in the steel sector) can be absorbed by an improvement in China’s domestic steel mill utilisations and falling exports (a dip of 30 per cent in 2017) as it remains a dominant producer, consumer, and exporter of steel globally, thereby influencing regional steel prices,” Kotak analysts said.
On the impact for the aluminium sector, too, analysts believe it may not be significant.
“The aluminium production in the US can increase to 1.4-1.5 mt from 0.79 mt in 2017 led by smelter restarts. This can reduce aluminium exports to the US by 600-700 kilo tonnes. However, we highlight that World ex-China markets are in deficit of 2 mt (2017) and demand is growing at 3-4 per cent on average (plus 1 mt per year). The US smelter restarts can only provide partial relief to looming tight global markets,” they said.