Jindal Steel, Vedanta and Tata Steel shed over a quarter of their value as their export dreams are quashed

• Shares of India’s largest steel companies have fallen dramatically in the last one-month as the government imposed export taxes of 15% on steel.
• These measures will bring down India's steel exports by 40% to 12 million tonnes (MT) in FY23, says CRISIL.
• Steel exports had reached a record high of 18.3 million tonnes in FY22, with prices at an all time high.

A little less than half of the export business of all Indian steel companies will vanish – all thanks to the Indian government’s decision to impose a 15% tax on eight steel products.

The companies which will be hurt the most are those who have been making the most of steel exports in the last few months — Tata Steel, SAIL, Jindal Steel and Power (JSPL) and JSW Steel.

"India's steel exports will drop 35-40% to 10-12 million tonnes this fiscal following the 15% export duty imposed on several finished steel products last month. Exports of iron ore and pellets will also fall this fiscal, and lower domestic prices," the CRISIL research analysis said.

It comes as no surprise then that most of these companies lost at least a quarter of their market capitalizations in the last one month – an after-effect of the tax which was imposed the very first time in history.

Steel exports, which had reached a record high of 18.3 million tonnes in FY22, with prices at all time high will continue to see momentum because of the disruption caused by the ongoing Russia-Ukraine conflict, says the report.

Note that Russia is a key exporter of steel, coking coal and pig iron.

This will leave steel companies with value and volume impact as domestic steel prices go down, while their export business is less profitable too.

As a result shares of the metal companies have been tumbling down as the measures will hit their business, which was booming for quite some time also aided by China’s de-carbonization drive.

The export tax will also reduce the margins on steel exports, which were attractive for the last one year. Indian companies had been gaining after lower exports from China due to its de-carbonization drive; and higher energy prices in Europe, as per Axis Securities.

“The 15% export tax will reduce the margins on steel exports, which were attractive for the last one year due to lower exports from China (due to its de-carbonisation drive) and higher energy prices in Europe,” according to a report by Axis Securities.


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