Wednesday, October 22, 2008

>Steel Sector

Current scenario: Government may impose import duty to avoid dumping by China..

Import duty on steel was removed and export duty was levied in April 08 to rein in inflationary pressures. Consequently,steel imports between April 08 and September 08 rose by 50% to about 3 mt as prices in China,

Thailand and Ukraine were ruling below domestic prices. With competitive pricing and slowdown in domestic demand, China's total steel exports globally rose to a record 7.8 mt in August 08. However, as international steel prices subsided, landed cost of imported Chinese steel dropped to $700/ton in India as against the domestic price of $750. China-based steel producers, backed by cheaper operating costs in met coal and power, have a significant price advantage over the domestic players.

There is a difference of $150 between Chinese and Indian domestic and export prices (Chinese domestic price is $600 and export price is $700, whereas Indian domestic and export prices are $750 and $850 respectively). Facing an overall economic slowdown, consumers are opting for cheaper Chinese steel, whose share in India's steel import basket surged from 10% in April 08 to about 48% in August 08.

To avoid large-scale dumping and protect domestic players, the government, responding to industry demands, may levy import duty to 15%, remove export duty (currently 15%) and reduce excise duty from 14.4% to 8%. There has been no capacity expansion in the past quarter with key players including JSW delaying the commissioning of their plants by over two months owing to current market conditions. Indian steel makers may have to cut production by 30% and continue to postpone expansion projects if the government does not act.

If govt responds favourably it would help domestic players more Sail and JSW steel ,Whereas it wont make much diffrence to Tata steel .The same CORUS which was once Tata steel's delight is haunting it.


Sail looks much better than Tata steel ,Sail looks like may take support near 80-85.
Tata steel looks like a wave extension case.A Close below 230 will target 200-180 atleast.
Plan your buys accordingly ,My views are for traders.



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