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Budget: Mixed announcements for large metal players

Budget: Mixed announcements for large metal players

The Budget announcements for the metal industry have focussed on the secondary metal producers (re-cyclers) by reducing the import duties on scrap. It also reduced the import duties on steel to bring down the domestic prices in a bid to help the micro, small and medium enterprises using metal as input.

These measures may not help the listed primary producers of the metal in the industry. But the infrastructure push in the economy nudged by the Budget would aid these companies with improved demand, going ahead.

Steel: Curb on prices

Steel prices in India have gone up by more than 50 per cent — from ₹35,750 per tonne in June 2020 to ₹55,000 in January 2021 (as per SteelMint) — supported by the recovery of domestic and global (especially China) demand as well as increased raw material costs.

A recent report by India Ratings and Research pointed out that the cost of infrastructure projects are up 20-25 per cent over pre-Covid levels.

Several industry bodies demanded government to intervene to bring down the steel prices.

To help the MSMEs and other user industries which have been severely hit by a recent sharp rise in iron and steel prices, the Budget 2021 reduced customs duty uniformly to 7.5 per cent on semis, flat, and long products of non-alloy, alloy, and stainless steels. Earlier, these products attracted 10/12.5 per cent customs duty.

Import of steel at lower prices would influence the domestic steel prices lowering the realisations of the players in the industry such as Tata Steel, JSW Steel, JSPL and SAIL.

Further, the Budget also exempted duty on steel scrap for a period up to 31st March, 2022 to help the metal re-cyclers in the country, who are significantly playing in the informal segment of the industry.

Base metals: not much

Budget 2021 announced reduction of customs duty on import of copper scrap from five per cent to 2.5 per cent.

This would help the secondary copper players who import the copper scrap, recycle and sell the refined copper. But it wouldn’t be of any benefit to the primary copper producers such as Hindalco and Hindustan Copper, which doesn’t depend on scrap.

In the case of the aluminium industry, the scrap dealers (small players who import scrap, recycle and convert it into finished products) had anticipated a removal of import duties amid the rising cost of scrap globally.

The larger players generally anticipated an increase in customs duties on scrap imports as the demand for aluminium is being met increasingly by recycled products.

The Budget maintained the status quo for the industry.

Infra-push

But with metals being a key raw materials in capital expenditure for infrasrtructure, higher focus on infrastructure spending will augur well for the large metal players. The neutral/negative impact on metal prices from reduction of import duties will likely be overshadowed by the rise in demand.

This article is auto-generated by Algorithm Source: www.thehindubusinessline.com

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