India’s iron ore and steel stocks plummet, autos surge after export tax hike

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Shares of Indian steel and iron ore groups including Tata Steel and JSW Steel fell at the fastest rate since the start of 2020 on Monday after the government imposed heavy export taxes on the sector , while automakers rose on lower input costs.

Shares of Indian steel and iron ore groups including Tata Steel and JSW Steel fell at the fastest rate since the start of 2020 on Monday after the government imposed heavy export taxes on the sector , while automakers rose on lower input costs.

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India imposed a 15% export tax on eight steel products on Saturday evening, as steelmakers seek to offset weak local demand by increasing their market share in Europe, whose supplies have been hit by the Russian invasion of Ukraine.

It has also increased export taxes on iron ore and concentrates to 50% from the current 30%, and imposed a hefty 45% tax on iron ore pellets, further increasing costs for steelmakers.

The Nifty metals index fell 8.9% on Monday, the fastest rate of decline since March 2020, while the Nifty auto index rose 2.9%.

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Jindal Steel and Power fell by a fifth, while top steelmaker Tata Steel fell 14.4% and JSW Steel 14.2%. State-run SAIL fell 14%.

The iron ore industry, which had benefited from a Supreme Court ruling allowing exports from a key southern state to resume on Friday, was hit hard by the decision to raise export taxes on Saturday .

Shares of state-owned NMDC fell 15%, while those of major mining conglomerate Vedanta fell 7%.

Indian automakers will benefit from lower input costs as steel industry executives say higher taxes almost rule out the possibility of exports and India’s domestic market will now be flooded with additional steel.

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Shares of top automaker Maruti rose 4.9%, while shares of Mahindra and Mahindra jumped 3.8%.

The steel export taxes were part of a series of changes to taxes on essential commodities aimed at curbing retail inflation, which has risen to its highest level in eight years.

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