Steel stocks rally on possible price hike, SAIL tops with 4.6% spike

Rebound in Chinese steel futures fuels positive sentiment

Frontline steel stocks rallied on Monday on the possibility of a price hike and rebound in Chinese steel futures.

Stocks of all major steel producers surged with Steel Authority of India Ltd (SAIL) leading the pack. The stock appreciated 4.63 per cent on the Bombay Stock Exchange (BSE) and closed at Rs 126.55. JSW Steel closed at Rs 710.55, Jindal Steel & Power (JSPL) at Rs 407.25 and Tata Steel 1125.65.  

Steel companies are understood to be mulling an increase in prices over the next few days. Moreover, Chinese steel futures also bounced back after some correction.

Ranjan Dhar, chief marketing officer, ArcelorMittal Nippon Steel India (AM/NS India), said, Chinese futures in the last two trading sessions (Friday and Monday) were up by $50-60 a tonne.

“Even if that is discounted, the gap between domestic price and landed cost of imports in China is huge. Landed cost of HRC (hot rolled coil) from China is at Rs 77,000 a tonne compared to Rs 67,000 a tonne domestic price. So there is a case for price increase.”

Another major steel producer said that an increase in prices for some products was possible. However, a final call was yet to be taken, he said.

JSPL managing director, V R Sharma, said, “Though the international spot market is very hot, still JSPL will try not to increase prices for domestic customers. The only compulsion can be if the iron ore prices or other input costs increase abruptly, then we will review.”

A finally call on price increase will be taken over the next few days. However, even as companies are considering an increase, domestic demand is muted with the localized lockdowns and restrictions announced by several states.  

Dhar said, “In the domestic market, though the inherent demand is intact, consumption is impacted a bit due to lockdown, which is temporary. We expect demand to come back from mid-June and July. There is demand from the infrastructure segment and some construction activity has started.”

However, even as domestic demand impacted due to the second Covid wave, export markets were strong. Dhar said, the three major destinations were Europe, South East Asia and the Middle East.

Steel prices have seen an unabated increase since November last year except for a pause in February. Since October, prices of HRC have increased by about 54 per cent. The increase was in line with global steel prices that were at an all-time high on the back of strong demand in China, followed by the EU and US, as well.

However, Chinese prices had corrected over the past week, however, Chinese steel prices had corrected after the government moved in to check a sharp increase in prices.