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Metal firm shares battered on export obligation levy

The federal government choice to levy export obligation of 15 per cent on completed metal and 45 per cent on pellets will hit margins and result in decrease capability utilisation within the trade, amid excessive enter prices.

The shares of main metal producers got here underneath heavy promoting strain on Monday, with the BSE Metallic index sliding 1,605 factors to shut at 17,655. JSW Metal and Tata Metal slipped 13 per cent to Rs 548 and Rs 1,024, whereas Jindal Metal and SAIL had been down 17 per cent and 11 per cent at Rs 396 and Rs 74, respectvely. Iron ore mining main NMDC dipped 13 per cent to Rs 128.

Chief Funding Strategist at Geojit Monetary Providers, V.Ok. Vijayakumar, mentioned the federal government’s choice to discourage metal exports and produce down uncooked materials costs are aimed toward cooling home metal costs.

Metallic corporations, together with the metal trade, have benefited from excessive costs following the Ukraine battle, he mentioned.

“Whereas each metal and non-ferrous corporations made supernormal revenue within the latest commodities bull-run, the federal government has singled out the metal sector. Making metal exports practically unviable will impression money flows within the trade and derail the plan to attain 300 million tonnes of metal capability in India by 2030,” mentioned Motilal Oswal Monetary Providers report.

India exported about 13.5 mt of completed metal and 5 mt of semi-finished metal final fiscal, whereas it imported about 4.eight mt of completed metal. The nation may flip a internet importer of an extra $5 billion within the subsequent four-five years, if additional growth plans are aborted, it added.

Leaving the export of slabs and billets from the ambit of export obligation additionally implies that India retains the corresponding carbon emission, which works in opposition to the federal government goal to cut back carbon emission, it mentioned.

However the export obligation, metal demand has been on a steep fall because of excessive costs and expectations of weak financial development, that are anticipated to tug down costs within the close to future. Home metal demand was down 7 per cent in April and is anticipated to stay comfortable in Could. This has led to hot-rolled coil costs falling 12 per cent in April. The drop in metal value comes at the same time as the worth of imported coal stays excessive. ICRA, in an evaluation, mentioned the trade’s working earnings would dip by $75-$100 a tonne within the seasonally weak September quarter.

Revealed on

Could 23, 2022

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