Stocks of steel companies surged in July 2 session with Tata Steel, JSW Steel, Jindal Steel and Steel Authority of India rising up to 3.6%. Nifty Metal was the top sectoral gainer on July 2 by rising 1.4% even as the benchmarks closed 0.35% lower.

Steel stocks, initially flat or slightly lower, gained after mills in Tangshan, China, were directed to maintain output restrictions, according to CNBC-TV18 citing Bloomberg report. These curbs are part of the Chinese government’s ongoing efforts to improve air quality and enforce environmental standards.

On July 2, Tata Steel shares closed 3.68% higher at Rs 166 apiece while those of SAIL were 3.4% higher at Rs 138 apiece.

JSW Steel shares increased 2.78% to Rs 1,058.2 while those of JSPL rose 2.18% to Rs 972 apiece.

Tangshan, in northeastern China, is known as the "cradle of modern Chinese industry" and serves as the country’s steel production hub. Earlier this year, Indian steelmakers faced pressure as Chinese producers flooded the market with cheap exports, prompting India to impose a 12% safeguard duty. Changes in Tangshan’s production levels have a significant impact on global steel prices and trade dynamics.

The safeguard duty, effective from April 21 for 200 days, applies to flat-rolled products of non-alloy and certain alloy steels to shield domestic producers from a surge in cheaper imports, particularly from countries such as China.

India’s steel exports fell more than 60 percent over the past three years to 6.95 million tonnes in FY25, after peaking at 18.51 million tonnes in FY22.

The levy is expected to boost per tonne EBITDA for steelmakers in the near term, the gains may be offset by proposed hikes in mineral taxes by state governments, analysts said.