keywords :
Indian steel manufacturers are yet to see the light at the end of the tunnel, as global demand remains weak, putting pressure on domestic prices. The Chinese property sector, a crucial market for metals, has not yet regained sufficient momentum.
“Average HRC prices in India fell ₹900 per tonne week-on-week to ₹59,000 per tonne, with leading Indian steel producers like JSW Steel Ltd and AM/NS India reducing their early May-23 hot rolled coil sales price by ₹2,000-2,500 per tonne month-on-month,” said analysts at Nomura Financial Advisory and Securities (India) in a report dated 8 May. AM/NS India is a joint venture between ArcelorMittal and Nippon Steel.
Moreover, domestic prices are currently at a premium to landed prices from countries like China, Vietnam, and Japan, indicating that a further decrease in domestic steel prices is possible.
On the bright side, raw material costs have seen some relief, which could positively impact margin performance. Despite a 1.7% month-on-month drop in HRC price, average HRC spreads have risen 4.3% month-on-month in May so far, according to Nomura analysts. This follows a significant 16% month-on-month drop in coking coal prices compared to the April average.
Additionally, iron ore, another key input, experienced a price decline. NMDC, the state-owned iron ore producer, cut lump ore and fines prices by nearly 7% and 2%, respectively, to ₹4,200 per tonne and ₹4,010 per tonne, effective 29 April. This reduction comes after NMDC had increased the commodity’s price four consecutive times since the government removed or lowered export duty on iron ore in mid-November.
But there are signs of rebound in global prices of iron ore and coking coal, note analysts at Motilal Oswal Financial Services in a report on 8 May. Investors in steel stocks would do well to closely track the trajectory of commodity costs.
Shares of leading steel companies such as JSW Steel and Tata Steel have fallen 5%-13% from their respective 52-week highs. Any significant upsides hereon depend on demand recovery, which currently appears unlikely.
“Demand continues to be subdued as customers across sectors have resorted to ‘wait-and-watch’ or ‘need-based buying’ and export order books for April’23 were also full. Trade prices could be impacted in coming weeks,” said Motilal Oswal analysts.