Indian steelmakers have implemented a series of price increases across key steel products in early January, marking a continuation of the upward pricing trend that began in December. The latest round of price adjustments spans major steel categories and is expected to provide positive momentum for sector profitability.

Hot Rolled Coil Price Movements

Hot rolled coil, a critical steel product used in various industrial applications, experienced sequential price increases over the past two months. The pricing trajectory shows sustained upward momentum across this key steel category.

Rebar Pricing Trends

Rebar prices demonstrated even more pronounced increases, with steelmakers implementing substantial hikes in both December and January. This construction-focused steel product has seen consistent upward price adjustments.

Sector Profitability Outlook

The sequential price increases across both hot rolled coil and rebar are anticipated to provide positive support to steelmaker profitability. These pricing adjustments reflect the industry's efforts to maintain margins and respond to market conditions. The consistent implementation of price hikes across key product categories suggests coordinated sector-wide pricing strategies.

Market Impact

The steel sector's ability to implement successive price increases indicates underlying demand strength and market acceptance of higher pricing levels. The price adjustments span the industry's most important product categories, suggesting broad-based pricing power across the steel value chain. These developments position the sector for improved financial performance in the current period.

The Central government has imposed a comprehensive three-year safeguard duty on select steel imports, marking a significant policy shift aimed at protecting domestic steelmakers from cheap foreign competition. The duty structure implements a graduated tariff system with rates of 12% in the first year, 11.5% in the second year, and 11% in the third year. The duty will not apply if imported HRC CIF price exceeds $675 per tonne.

Scope and Coverage of the Safeguard Duty

The safeguard duty applies to all countries except developing nations, though China, Vietnam, and Nepal are excluded from the developing country exemption. Specialty steel products, including stainless steel, remain exempt from the duty structure. HSBC Global Investment Research noted that this addresses key investor concerns about downside risks to earnings for domestic steelmakers, particularly after the provisional duty was set to expire in November 2025.

December Price Momentum and Market Response

Domestic steel prices have already begun firming up significantly. Retail HRC prices surged from ₹45,800 per tonne at end-November to ₹49,000 per tonne in December, as mills implemented two price hikes totalling ₹2,000 per tonne.

Import Parity Analysis and Future Projections

HSBC's analysis of current market dynamics reveals significant pricing opportunities for domestic producers. Based on FOB prices of $470-480 per tonne, the brokerage estimates implied landed prices after safeguard duty implementation.

Given this pricing gap, HSBC expects further price hikes of ₹1,500-2,000 per tonne in January, building on December's momentum.

Earnings Impact and Risk Assessment

HSBC emphasized that the safeguard duty effectively removes most earnings downgrade risk for domestic steelmakers, particularly crucial given anticipated weak third-quarter results and a $30 per tonne rise in coking coal prices since September. The policy provides a multi-year earnings floor during a period when most companies are embarking on large capital expenditure cycles.

However, the brokerage noted that meaningful earnings upgrades would require stronger regional price momentum alongside a decline in Chinese steel exports. While recent developments such as export licensing requirements are positive signals, an actual fall in Chinese exports may still take time to materialize.

Market Outlook and Investment Perspective

With a supportive global backdrop for metals, low investor positioning, and regulatory support through safeguard duty, HSBC believes Indian steel stocks could begin catching up with base metal stocks in the coming period. The combination of policy support and price momentum creates favorable conditions for sector re-rating, though sustained improvement depends on broader regional dynamics and Chinese export trends.