A 15% export duty on steel is also likely to further weaken an oversupplied domestic market. Analysts, including at JPMorgan and Jefferies, called it “negative” for the sector. Jindal Steel & Power Ltd. said the tax “will not be competitive” even though it considers the decision “temporary” and expects “things to be normalized” by July.

Yet the levy will eventually hurt the margins of the factories.

Indian steelmakers “aim for a sharp margin correction in the first half of FY23, driven by a combination of weak regional prices, as Covid-led lockdowns in China have had a greater impact on demand than on supply, stubbornly high coking coal prices, declining steel realization driven by lower export prices, lower domestic prices on weak demand and the imposition of steel export duties,” Kotak Securities said in a statement.

Seshagiri Rao, deputy general manager of JSW Steel, told BQ Prime that, on the one hand, coking coal prices have gone up and on the other hand, achievements have gone down. This could affect the margin.

TV Narendran, managing director of Tata Steel, sees this as an even bigger concern than export duties. Coking coal prices are still above $500 a ton, he told BQ Prime in Davos. “It shows no signs of dropping in a hurry and that’s a concern because it’s a huge entry cost for us.”