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Steel—prices under pressure amid policy standstill

Domestic steel prices remain under pressure, with flat/long prices down 5%/0.5% versus the 2QFY26 average. The ongoing policy uncertainty related to safeguard duty is likely to push domestic price recovery to 4QFY26E, suggesting a tepid 3QFY26E. Niti Aayog’s recommendation to withdraw various non-tariff barriers on steel imports could impact domestic premiums over the medium term. We trim our FY2026E earnings, factoring in recent market trends. Prefer JSP/JSTL over TATA/SAIL.

Weak regional prices and policy vacuum keep domestic prices under pressure

China’s export prices were at US$460/ton, 5% lower versus September exit prices. Despite elevated net exports (+7.4% yoy YTD), rising tariff barriers and subdued domestic demand are keeping prices under pressure. We expect the market to remain sluggish in the near term in the absence of supply-side reforms or policy-support measures. In India, HRC prices are 3.5% below September exit prices, while rebar prices improved 2.1% from the recent festive season lows. However, HRC/rebar prices remain 5%/0.4% below the 2QFY26 average. Ongoing policy uncertainty related to safeguard duty is likely to push domestic price recovery to 4QFY26E, suggesting tepid 3QFY26 margins.

Safeguard duty widely expected to be notified soon

DGTR’s recommendation for a three-year extension of safeguard duty awaits approval from the Finance Ministry following its expiry on November 7, 2025. Industry sources expect the delay to be procedural. Domestic prices could correct 2-3% if the government does not extend safeguard duty. Domestic steel demand moderated in October 2025 to +4.7% yoy (YTD +7.8% yoy)—largely anticipated, given the earlier festive season versus last year. Net imports have dropped significantly in 7MFY26 due to various trade barriers, but India remains a net importer at 0.35 mn tons (versus 3 mn tons last year) on a YTDFY26 basis.

Withdrawal of QCOs for various steel products to ease import bottlenecks

The government’s apex public policy think tank, Niti Aayog, has recommended withdrawing various non-tariff barriers such as quality control orders (QCOs), steel import monitoring systems (SIMS) and no objection certificates (NOCs) for steel product imports. These barriers have created severe bottlenecks, uncertainty in procurement and elevated domestic premiums. Domestic HRC prices traded at a ~3-4% premium to import parity during FY2023-25 due to these measures compared with a 2-3% discount historically.

We trim near-term earnings, continue to prefer non-integrated steel companies

We trim aggregate EBITDA estimates for our coverage by 4%/1%/1% for FY2026/27/28E, factoring in ongoing sluggish market dynamics. Notification of safeguard duty and subsequent domestic steel price hikes are the key catalysts in the near term. We continue to see better risk-reward in non-integrated steel producers—JSPL and JSTL. Maintain SELL on SAIL and TATA.

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