Steel stocks surge up to 5% on muted Chinese steel output

The stocks of domestic steel companies surged nearly 5 per cent on Monday, on the back of muted steel production data from China. Share prices of Tata Steel, Jindal Steel and SAIL moved up by 4.59 per cent, 4.10 per cent and 3.49 per cent respectively.

Other steel companies such as APL Apollo, JSW Steel, NMDC, Ratnamani and National Aluminium also soared in the range of 0.5 per cent to 3.3 per cent. In comparison BSE Sensex was up by 0.4 per cent on Monday’s intra day deals.

One major reason for this uptick in stock prices is the silent steel production in China for the month of January and February, with analysts predicting a similar fate for March due to subdued demand. China’s crude steel output was merely up by 1.6 per cent YoY while the daily average fell by 2.1 per cent YoY.

The National Bureau of Statistics (NBS) reported that China, the world's largest steel producer, manufactured 167.96 million metric tons of steel in January and February combined. 

This combined reporting is customary to account for the fluctuating Lunar New Year holiday's impact, which occurs at varying times during these months. The daily output averaged around 2.8 million tons, compared to 2.18 million tons in December 2023 and 2.86 million tons during the same period in 2023, as reported by Reuters.

According to a report by research firm, BNP Paribas, highlighted the downside risk to domestic steel prices from cheaper imports. This risk persists with domestic prices higher than import prices from China and Japan. A falling production in China may allow domestic companies to sell more in the Indian market.

Robust Demand and Exports
Apart from sluggish chinese output, another greenlight for India could be a 9 per cent YoY growth in steel demand and a 14 per cent YoY increase production in February 2024. The country also turned net exporter of steel in January and February, analysts at BNP Paribas wrote in thier March report.  

Steel exports improved to over 1 million tonnes (mnt) in Feb 24 vs 0.85 mnt in Jan 24 and 0.64 mnt in Dec 23. Jan and Feb 24 steel imports came in at 0.8 mnt each vs 1.3 mnt on December 23. As a result, India became a net exporter of steel in Jan-Feb 24, the report noted.