Steel makers in demand

Shares of steel producers gained on Monday after media reports suggested that US Steel and ArcelorMittal have raised flat-rolled steel prices today, their third increase in less than a month.

Jindal Steel & Power (up 5.34%), Hindalco Industries (up 4.08%), Jindal Stainless (up 3.61%), Tata Steel (up 3.35%), NMDC (up 3.29%), JSW Steel (up 2.57%) and SAIL (up 1.81%) advanced.

Jayant Acharya, director (sales and marketing), JSW Steel, was quoted by the media saying that, globally, steel prices have gone up by $20-$30 a tonne due to a production shut-down by most steel companies, as their selling prices had fallen below production costs.

Last week, the media reported that steel companies in India have hiked prices by Rs 500-750 a tonne for the first time this fiscal. However, domestic prices are still at a discount to international prices, suggesting some room for further upside in steel prices.

Media reports further suggest that Chinese steel production dropped by one million tonnes, a decline of 1.2%, compared to October last year. China produced 81 million tonnes of crude steel in October 2019. This is the first decline in steel production year-on-year (y-o-y) since December 2017, the reports added.

Certain positive development on the US-China trade war front also gave some boost to steel producers after U.S. national security adviser Robert O'Brien was quoted by the media saying an initial trade agreement with China is still possible by the end of the year.

Also, on Friday, US President Donald Trump and China's Xi Jinping, both, had underscored their desire to sign an initial trade deal and defuse a 16-month tariff war that has lowered global growth, providing a welcome boost to financial markets, according to a media report.

Paul Bartholomew, senior managing editor, S&P Global Platts told the media that 2020 is going to be a stronger year for steel as the demand will be solid due to Chinese production remaining lower and several projects of property constructions in the pipeline. Compared to other metal prices, which are subdued, steel has been doing well for the last couple of weeks, he added.

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