The Union government's move to reduce import duty on raw material and export duty on finished steel along amid tepid demand during the seasonally weak monsoon quarter could lead to 10-15% correction in  domestic steel prices in the coming months, ratings agency ICRA said on Monday.

ICRA said that government’s decision to impose a 15% export duty on a range of finished steel products accounted for almost 95% of India’s overall finished steel exports in FY21 and FY22 and would render exports significantly less attractive going forward, which in turn could exert pressure on domestic steel prices and industry capacity utilization levels.

On Saturday, in an attempt to improve domestic steel availability and reign in steel prices, the Union government imposed a 15% export duty on a range of finished steel products. In other steel categories, an export duty of 15% has also been levied on pig iron. On the raw material side, the Government has increased the export duty on 58% and above Fe grade iron ore fines and lumps from 30% to 50%.

“In FY2022, Indian mills recorded a 25% Y-o-Y growth in finished steel exports as they took the benefit of elevated seaborne prices. Europe, Vietnam and the Middle East were the three largest destinations for Indian steel exports, together accounting for around 50% of India’s overall steel exports, including semis. We believe that many of these destinations would become less attractive now as mills evaluate the economics of a higher duty," Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings, ICRA said.