Safeguard duty to provide Rs 1,000-1,300 per tonne relief to primary steelmakers: Report

With the duty intervention and relatively favourable input costs, the Ebitda per tonne of the domestic primary-steel makers is expected to recover by Rs 1,000-1,300 per tonne in fiscal 2026.

This will ease pressure on debt metrics as sectoral leverage had risen last fiscal to fund the sizeable ongoing capital expenditure, the report said which analysed five major steel producers, accounting for 60 per cent of the domestic capacity.

“The domestic steel realisations were at a 5 per cent premium vis-a-vis imports for most parts of the last two fiscals. This premium was on an uptrend in the last quarter of fiscal 2025, due to healthy domestic demand and in anticipation of the safeguard duty, while global prices continued to decline. However, with 12 per cent safeguard duty in place, the domestic producers will now have some respite,” explained Ankit Hakhu, Director, Crisil Ratings.

The redirection of steel exports from surplus countries such as China, South Korea and Japan had led to an increase in low-cost imports into India, hurting domestic steel realisations, which are influenced by the landed cost of imports.

The landed cost of imports, even post-duty, could decline further, if global steel prices weaken amid persistent oversupply and rising trade protectionism.

This could limit the ability of the Indian players to take additional hikes. Net-net, while the imposition of safeguard duty will support the import parity, a complete normalisation of price dynamics may take longer.

Aside from cheaper import prices, domestic prices may be restricted by an expected increase in domestic supply from new capacities. After multiple years of limited additions, the industry added 10 million tonnes per annum (MTPA) capacity last fiscal, and another 10-12 MTPA is planned in fiscal 2026.

According to the report, the players are adding these capacities on the back of healthy domestic demand of 9-10 per cent expected for fiscal 2026, on account of continued infrastructure push and robust demand from the building and construction segments.

Ankush Tyagi, Associate Director, Crisil Ratings, said that while the safeguard duty and favourable cost of production will prop up operating profitability in fiscal 2026, domestic utilization will also have to keep pace with the capacity additions.