New Delhi: The decision to increase export duty on iron ore and some steel middlemen has dampened the enthusiasm of local manufacturers.
On the one hand, the central government is making every effort to control the rising inflation in the country, while on the other hand the top mining and steel groups are warning of adverse effects.
As a result, the metal index took a hard hit in the stock markets on Monday.
Jindal Steel & Power was the biggest loser as the stock fell 17.5 per cent on the NSE, while it fell 17.4 per cent to close at Rs 396 on the BSE.
Whereas, steel and iron ore groups including Tata Steel and JSW Steel have slipped at their fastest pace since the beginning of 2020.
Top steel maker Tata Steel fell 12.32 per cent and JSW Steel 13.21 per cent. Apart from this, Jindal Stainless lost over 15 per cent on BSE and NSE. State-run SAIL rallied up to 10.42 per cent on the NSE, while it closed 10.96 per cent lower at Rs 74 on the BSE.
The iron ore industry was also badly hit by the move to boost export taxes.
Shares of state-run NMDC closed at Rs 128, down 12.44 per cent on the BSE, while it closed at 11.74 per cent on the NSE. Top mining conglomerate Vedanta fell as much as 7 per cent during the day but eventually recovered somewhat with a fall of 2.67 per cent on the NSE.
why the stock crashed today
Metal stocks witnessed heavy selling on Monday after the Center imposed 15 per cent export tax on eight steel products.
It also waived off customs duty on imports of certain raw materials, including coking coal and ferronicals. Both are used by the steel industry as a major input.
The announcement came at a time when steelmakers were trying to meet weak local demand by increasing market share in Europe, whose supplies have been hit by Russia’s invasion of Ukraine.
Import duty on ferronical, coking coal, PCI coal has been reduced from 2.5 per cent, while duty on coke and semi-coke has been reduced from 5 per cent to ‘nil’.
The tax on export of iron ore and concentrates has been increased from 30 per cent to 50 per cent, while the duty on iron pellets has been levied at 45 per cent.
Finance Minister Nirmala Sitharaman said the change in customs duty on raw materials and middlemen for iron and steel would “reduce their prices”.
Why was the export duty increased?
Inflation has become a big headache for the government.
Wholesale and consumer prices rose in April, prompting the central bank to hike interest rates in an unscheduled policy meeting this month, with another likely in June.
Commodity prices have been rising globally since Russia’s invasion of Ukraine in February. This disrupted key supply chain routes, especially at a time when economies were trying to recover from the slowdown of the last two years due to COVID-19.
Steel makers warn of adverse impact
The Indian Steel Association warned that the new export duty on steel products would have an “adverse effect” on mills that aim to boost exports and increase global market share following Russia’s invasion of Ukraine.
The world’s second largest crude steel producer churned out a record 120 million tonnes in the financial year ended March.
“The latest policy will reduce fresh investments,” said Dilip Oommen, chief executive officer of ArcelorMittal Nippon Steel India Ltd (AM/NS India) and president of the Indian Steel Association.
AM/NS India – a joint venture between ArcelorMittal and Nippon Steel – believes the decision to raise the steel export tax will impact the company’s 90,000 tonnes of steel exports every month, Oommen said.
Kaustubh Chaubal, vice president of corporate finance group, Moody’s Investors Service, separately said the increase in export duty would increase the cost of domestic steel mills.
(with inputs from agencies)
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