US import tariff likely to have limited impact: Analysts

Metal stocks bore the brunt of US President Donald Trump’s plans of imposing 25 per cent import tariff on steel and 10 per cent on aluminium with the Nifty Metal index slipping 3.7 per cent in intra-day deals. By comparison, the Nifty 50 index lost 1.2 per cent. Among individual stocks, NMDC, Jindal Steel, Jindal Stainless (Hisar), National Aluminium (NALCO), JSW Steel and SAIL slipped 4.6 per cent to 6.4 per cent during the day. Analysts at Kotak Institutional equities estimate that steel exports to US by other countries can decline by 9-14 million tons due to imposition of higher import duties and ramp-up in its domestic steel mill utilisation rates by 80-85% (from 72% at present). However, this will not meaningfully dent the fortunes of the steel and aluminium sectors, they believe. “The extent of potential steel mill, aluminium smelter restarts in the US will not be meaningful to significantly weaken the outlook on global aluminium and steel, especially given supply-side reforms in China in these industries, said Abhishek Poddar and Samrat Verma of Kotak in a report. ALSO READ: Indian industry braces for flood of Chinese steel following US tariff hike According to reports, US produced 82 million tonnes (mt) of steel in 2017 on capacity of 113 million tonnes per annum (mtpa) and imported 36 million tonnes of the metal. The largest steel exporters to US include Canada, Brazil, South Korea, Mexico and Russia, which together account for close to 60 per cent exports to the US.

India exported close to 0.9 million tonnes of steel to the US in 2017. “We believe the disruption (in steel sector) can be absorbed by improvement in China’s domestic steel mill utilisations and falling exports (dip of 30% in 2017) as it remains a dominant producer, consumer and exporter of steel globally thereby influencing regional steel prices,”. Adding: “The aluminum production in US can increase to 1.4-1.5 million tonnes from 0.79 million tonnes in 2017 led by smelter restarts. This can reduce aluminum exports to US by 600-700 kilo tonnes (kt). However, we highlight that World ex-China markets are in deficit of 2 million tonnes (2017) and demand is growing at 3-4% on average (+1 mn tons per year). The US smelter restarts can only provide partial relief to looming tight global markets.” (See attached file: Steel.xlsx)