Stock Market Today: Tata Steel, JSW Steel, Jindal Steel and Power, Steel Authority of India Ltd (SAIL) share price have risen 5-36% year to date. While the steel demand is expected firm in the country and Union budget is also expected to provide impetus to infrastructure and housing activities benefitting steel consumption, nevertheless it is the steel prices in the country that remain a weak link.
The steel prices in the domestic market that had remained flat during the April -June quarter after seeing correction in the January-March quarter have corrected further in July. While Lok Sabha Elections and heat wave conditions during the June quarter impacted construction activities, the onset of monsoon is likely to keep construction activities subdued for some more time.
Steel prices are witnessing a correction, with steel mills announcing Rs1,000-1,500 a ton price cuts for July 2024, said analysts at Kotak Institutional Equities post their channel checks. Since the domestic prices are still at a 6-7% premium to import parity, it suggests that price weakness should persist, they added.
During Q1FY25, average domestic Hot Rolled prices remained flat sequentially at ₹53,630 a ton (down 7% YoY) suggested Motilal Oswal Financial Services data.
The weakness in steel prices is also being led by weak demand in China who happens to be the largest consumer of commodities.
Manav Gogia, Research Analyst at Yes Securities said that “We see that the global steel prices will remain under-pressure in the near term majorly due to China’s rising steel exports and poor demand outlook”. Such a situation will automatically impact the Indian steel industry creating a virtual price ceiling for the steel producers in order to protect itself from the cheaper Chinese imports, feels Gogia.
The production in China has not seen any slowdown and with continuous production activities going on in Chin a, the exports from China are likely to remain elevated keeping a tab on steel price globally.
Analysts feel that the domestic steel producers will be forced to take price cuts due to the global pricing as well as the upcoming monsoon season.
All this is likely to keep pressure on profitability of Steel producers.
Analysts at Kotak say that muted prices and costs suggest that steel margins should remain subdued in the first half FY25. They prefer Jindal Steel and Power and JSW Steel over Tata Steel, SAIL and NMDC in the ferrous space.
Yes Securities picks nevertheless include Tata Steel, SAIL and Godawari Power & Ispat Ltd.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
