Post-budget analysis - Metal

Metal 15,863.17 -1.56%

May 02, 15:46

Post-budget analysis

Steel

What the Budget does

# Steel melting scrap will be exempt from customs duty

# Excise duty reduction in select segments of automobile manufacturing

# Continuation of power sector reforms

# Coal regulator to be appointed

# Dividend tax paid by parent company allowed to be set off against the same paid by its subsidiary

Impact on sector

# Reduction in customs duty on scrap will help steel manufacturers that use the electric arc furnace route for steel manufacturing lower their costs. On the other hand, it will be a negative for manufacturers that use the blast furnace route.

# If auto manufacturers pass on the reduced excise benefits in the form of lower prices, it will help spur demand for automobiles, which in turn will drive steel demand

# Increased investment in the power sector will also help boost demand for steel

# The proposed coal regulator will help ease the process of allocating coal blocks, a key raw material in the steel manufacturing process

Impact on companies

# Reduction in excise duties on automobiles will help companies that supply steel to auto makers. Key beneficiary would be Tata Steel

# Players that supply steel to the power equipment companies like SAIL and JSW Steel will benefit from increased investments in the power sector

# Better access to coal mines will be a positive for all the players that do not have their own captive mines

Full report | Pre budget analysis

Aluminium

What the Budget does

# Aluminium metal scrap to be exempt from customs duty

# Continuation of power sector reforms

# Excise duty reduced on manufacturing of automobiles of certain specifications

# Coal regulator to be appointed to oversee allocation of coal blocks

# Encouragement to usage of green technology

# Dividend tax paid by parent company allowed to be set off against the same paid by its subsidiary

Impact on sector

# While reduction in customs duty on aluminium metal scrap is positive for certain secondary aluminium manufacturers, it is negative for ingot manufacturers like NALCO and HINDALCO

# Increased investments in T&D will help boost demand for aluminium as the electrical sector is the major consumer of aluminium in the country

# If the auto players pass on the reduced excise duty benefits, it will help spur auto demand, which in turn would drive demand for aluminium based auto components

# Promotion of green technology will lead to demand shift towards aluminium owing to its environment friendly qualities like lower weight and better strength

# The proposed coal regulator will help ease the process of allocating coal blocks, a key feedstock for captive power plants

Impact on companies

# Companies like NALCO and HINDALCO will be positively impacted due to greater demand from sectors like auto and power

# Customs duty exemption on aluminium metal scrap is likely to make its cost more competitive vis-a-vis the ingots being manufactured by NALCO and HINDALCO