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Metals & Mining
We do not expect the government to hike excise duty on metals due
to the current inflationary pressures. We expect the Budget to be
positive for steel, while iron ore miners may be hit.
Fig 16 – Budget expectations and possible impact on companies
Expected Measures Impact Company
No change in excise duty Positive All companies
No increase in import duty on steel Neutral All companies
Increase in export tax on iron ore Negative Sesa Goa, NMDC
Reduction in import duty on thermal coal Positive HZL, Secondary steel producers
Reduction in import duty on coke and steel scrap Positive All steel companies
Source: Anand Rathi Research
Expectations
We expect the government to lay emphasis on reducing raw material
cost pressures. This would favour metal manufacturers and ease
inflation. Reduction in import duty on raw materials (met coke, steel
scrap), so as to control sky-rocketing prices, is likely.
We expect import duty on steel to be unchanged at 5%. The
government is unlikely to hike excise duty on metals, which is now at
10%, as this would add to inflationary pressure. Export tax on iron ore,
which is now 15% on lumps and 5% on iron ore fines, is expected to
increase to 20% on both fines and lumps. This would help to
discourage iron-ore exports and push domestic iron ore prices down,
thereby controlling inflation.
We expect the government to retain its continuing thrust on
infrastructure spending and increased allocation for infrastructure
projects. 26% profit sharing by mining companies with locals is
expected as part of the new Mining Policy and likely to addressed
separately as part of the new Mining Bill.
Impact on the sector
Steel players have twice hiked prices this year to combat rising input
costs of iron ore and coking coal.
No increase in excise duty on steel/base metals: would be positive for
the steel and non-ferrous sector, as raw material prices have
skyrocketed and companies are finding it difficult to fully pass them
on. Any reduction in import duties on steel-making raw materials (met
coke and steel scrap) would be positive for steel, especially in the rising
cost environment.
Expected increase in export tax on iron ore fines and lumps would be
negative for iron ore, as 50% of the iron ore produced is exported.
Companies affected
The metals sector would benefit if excise duty is unchanged. Nonintegrated
steel companies (JSW Steel, Essar) would benefit more as they
need to increase prices to pass on the higher costs of inputs. Sesa Goa and
NMDC would be hit due to a hike in export tax on iron ore fines and
lumps.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Metals & Mining
We do not expect the government to hike excise duty on metals due
to the current inflationary pressures. We expect the Budget to be
positive for steel, while iron ore miners may be hit.
Fig 16 – Budget expectations and possible impact on companies
Expected Measures Impact Company
No change in excise duty Positive All companies
No increase in import duty on steel Neutral All companies
Increase in export tax on iron ore Negative Sesa Goa, NMDC
Reduction in import duty on thermal coal Positive HZL, Secondary steel producers
Reduction in import duty on coke and steel scrap Positive All steel companies
Source: Anand Rathi Research
Expectations
We expect the government to lay emphasis on reducing raw material
cost pressures. This would favour metal manufacturers and ease
inflation. Reduction in import duty on raw materials (met coke, steel
scrap), so as to control sky-rocketing prices, is likely.
We expect import duty on steel to be unchanged at 5%. The
government is unlikely to hike excise duty on metals, which is now at
10%, as this would add to inflationary pressure. Export tax on iron ore,
which is now 15% on lumps and 5% on iron ore fines, is expected to
increase to 20% on both fines and lumps. This would help to
discourage iron-ore exports and push domestic iron ore prices down,
thereby controlling inflation.
We expect the government to retain its continuing thrust on
infrastructure spending and increased allocation for infrastructure
projects. 26% profit sharing by mining companies with locals is
expected as part of the new Mining Policy and likely to addressed
separately as part of the new Mining Bill.
Impact on the sector
Steel players have twice hiked prices this year to combat rising input
costs of iron ore and coking coal.
No increase in excise duty on steel/base metals: would be positive for
the steel and non-ferrous sector, as raw material prices have
skyrocketed and companies are finding it difficult to fully pass them
on. Any reduction in import duties on steel-making raw materials (met
coke and steel scrap) would be positive for steel, especially in the rising
cost environment.
Expected increase in export tax on iron ore fines and lumps would be
negative for iron ore, as 50% of the iron ore produced is exported.
Companies affected
The metals sector would benefit if excise duty is unchanged. Nonintegrated
steel companies (JSW Steel, Essar) would benefit more as they
need to increase prices to pass on the higher costs of inputs. Sesa Goa and
NMDC would be hit due to a hike in export tax on iron ore fines and
lumps.
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