Operational metric of Indian steel companies remains far more robust: Amit Dixit, Edelweiss Securities
ET Now|
Updated: Mar 05, 2018, 01.59 PM IST
Talking to ET Now,
Amit Dixit, Edelweiss Securities
, talks about the threats that loom on global trade post the US President’s proposal of increasing import tariffs on steel and aluminum. Dixit also explains how Indian steel companies are pretty much insulated from the decision.
Edited excerpts:
Steep US tariff measures on steel and aluminium have sent world markets reeling across the board. How would these cuts change the trade environment for steel especially since US is the biggest steel importer in the world? Do you see retaliatory measures by other countries coming in?
Yes absolutely. The tariff proposed first of all comes after very steep AVD, CVD imports imposed by US and Europe on countries like China. Yes it is absolutely correct that the announcement has the potency to distort the trade flows across the globe. US imports around 35 million tonnes, out of which, most of the steel comes from Canada, Mexico and Brazil. However, as per the overall sentiment, it is believed that this tariff would definitely result in the surplus steel in European countries in particular. So, definitely the announcement has the capability to disrupt the global operating environment.
While India may not be impacted, the concern is that steel shipments outbound from countries like Korea and Japan for the US may be diverted and dumped into countries like India again. Would that be a big worry?
Yes, that is definitely a worry and also a very legitimate concern at the moment. The exports to US from India is far more muted with only just 6% of the total exports going to US. Therefore, in terms of US direct connection, the companies are quite insulated. But as far as Japan and Korea are concerned, there is definitely threat from these countries. Apart from it, another threat that can emerge in future is from the point of view of prices as currently steel prices from India and Korea and Japan are almost running neck and neck. Hence, a pressure on pricing in futures, seems inevitable alongwith the pressure on volumes.
All the global or the major steel stocks in Asia on an average are down by about 5% to 11% in last three days. Do you think that kind of adjustment could happen for Indian steel companies as well because after all, steel is a commodity and if there is a fall in Chinese steel stocks, Indian steel stocks will also have to adjust?
We have to again see the difference here. There is a distinction between net exporting countries and net importing countries. Japan, Korea, Taiwan,Vietnam and Russia are net exporters and hence are most impacted because they actually supply steel to the US. Hence, if any trade distortion happens globally, these are the countries which will face the maximum wrath. Therefore, in other words, while definitely a knee-jerk reaction can be expected in Indian steel stocks today, the overall operating metric of Indian steel companies remains robust.
Edited excerpts:
Steep US tariff measures on steel and aluminium have sent world markets reeling across the board. How would these cuts change the trade environment for steel especially since US is the biggest steel importer in the world? Do you see retaliatory measures by other countries coming in?
Yes absolutely. The tariff proposed first of all comes after very steep AVD, CVD imports imposed by US and Europe on countries like China. Yes it is absolutely correct that the announcement has the potency to distort the trade flows across the globe. US imports around 35 million tonnes, out of which, most of the steel comes from Canada, Mexico and Brazil. However, as per the overall sentiment, it is believed that this tariff would definitely result in the surplus steel in European countries in particular. So, definitely the announcement has the capability to disrupt the global operating environment.
While India may not be impacted, the concern is that steel shipments outbound from countries like Korea and Japan for the US may be diverted and dumped into countries like India again. Would that be a big worry?
Yes, that is definitely a worry and also a very legitimate concern at the moment. The exports to US from India is far more muted with only just 6% of the total exports going to US. Therefore, in terms of US direct connection, the companies are quite insulated. But as far as Japan and Korea are concerned, there is definitely threat from these countries. Apart from it, another threat that can emerge in future is from the point of view of prices as currently steel prices from India and Korea and Japan are almost running neck and neck. Hence, a pressure on pricing in futures, seems inevitable alongwith the pressure on volumes.
All the global or the major steel stocks in Asia on an average are down by about 5% to 11% in last three days. Do you think that kind of adjustment could happen for Indian steel companies as well because after all, steel is a commodity and if there is a fall in Chinese steel stocks, Indian steel stocks will also have to adjust?
We have to again see the difference here. There is a distinction between net exporting countries and net importing countries. Japan, Korea, Taiwan,Vietnam and Russia are net exporters and hence are most impacted because they actually supply steel to the US. Hence, if any trade distortion happens globally, these are the countries which will face the maximum wrath. Therefore, in other words, while definitely a knee-jerk reaction can be expected in Indian steel stocks today, the overall operating metric of Indian steel companies remains robust.
