The Shine is Back on Some Steel Companies

Published: Feb 28, 2011 01:26:25 PM IST

The excise duty increase on iron ore will benefit local steel makers in two important ways. This comes at a time when the international prices of iron ore are ruling high, 40 percent above the year-ago level. So, iron ore miners in India are tempted to export more and sell less locally. But the duty hike will make all grades of ore that much costlier and less export-competitive. There will be more ore in the domestic market.

The duty hike will result in costlier ore in the domestic market also, but then steel prices will go up in conjunction with that. Companies like Steel Authority of India Ltd. and Tata Steel, which have tied up their iron ore supply, will benefit from this price increase but won't have to pay the excise duty because they use their own ore. That means extra profits.

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