China risks, pricing divergence cloud steel sector outlook; what's next?

Key constituents of Nifty Metal index, steel stocks face a challenging earnings season amid diverging domestic pricing trends and mounting global risks from China and tighter EU import restrictions.

Steel sector outlook: The steel sector has witnessed strong momentum in recent quarters, driven by higher global metal prices and robust demand expectations amid India's infrastructure push, making the metal pack one of the top-performing sectors in 2026. 

 

Data from ACE Equity shows that the Nifty Metal, with an 11.49 per cent year-to-date (Y-T-D) rally, has beaten the Nifty 50 index, which lost 7.31 per cent in the same period. Steel companies, which account for around 40 per cent of the index, are expected to remain in focus this earnings season as their June-quarter performance is likely to shape the sector's trajectory. 

 

Stock performance within the steel pack, however, has been mixed. Heavyweights such as JSW Steel, Tata Steel and SAIL are up 6–10 per cent Y-T-D, while Jindal Steel & Power, Jindal Stainless and APL Apollo Tubes have declined 3–12 per cent. Welspun Corp has been the standout performer, delivering near multibagger returns of 94 per cent.

What could influence steel sector earnings performance?

Analysts say stable hot rolled coil (HRC) prices could support integrated steelmakers, though falling rebar prices could offset the impact for long steel producers, resulting in a mixed bag show. 

Domestic HRC prices have remained stable at Rs 58,200 per tonne while rebar prices have lost 16.5 per cent to Rs 49,500 per tonne in the last two months, posing a significant headwind for long steel manufacturers.  

Last week, HRC prices moderated by ₹200 per tonne to ₹57,850 per tonne, while rebar prices fell further by ₹1,300 per tonne to ₹47,950 per tonne, reaching their lowest level in CY26, Nomura data shows.  

Ponmudi R, CEO of Enrich Money, said the June quarter is expected to see a gradual recovery rather than a "blockbuster quarter." He said Ebitda per tonne will be the key metric to watch this earnings season, as it will show whether steelmakers have been able to convert higher steel prices into better profitability despite rising raw material costs. 

 

"For integrated Indian steel producers, I expect the sector average Ebitda per tonne to be in the range of ₹9,000–10,500 during Q1 FY27," he said.

 

The impact of contrasting pricing trends may extend to Q2FY27 earnings performance, Elara Capital cautioned.   

 

The global factor

Beyond domestic pricing, the sector is also contending with a rapidly evolving global environment. Elara noted that China's record steel exports, weaker construction demand at home, tighter European Union import quotas, and softer international steel prices are expected to reshape global trade flows and intensify competition for exporters.

 

China's steel export shipments rose 7 per cent Y-o-Y to 10.3 million tonnes in June, the highest monthly export volume in recent months. 

 

Similarly, access to key overseas markets becomes more restrictive. "The EU has tightened its steel safeguard regime by reducing tariff-rate quotas by 47 per cent and increasing out-of-quota duty to 50 per cent from 25 per cent across 26 steel product categories. The move is aimed at protecting domestic producers from persistent global steel overcapacity and is set to reshape global steel trade flows," Elara said.

 

Analysts said that while domestic safeguard measures provide some support, Indian companies cannot remain completely insulated from global pricing trends.  Read more: Indian steelmakers pivot home as Europe curbs imports, China hits margins

 

Stock-specific outlook

Pomundi said that among the major players, JSW Steel is likely to remain the strongest in the basket, supported by higher flat-steel exposure, operational efficiency and a better value-added product mix.

 

SAIL is likely to remain under relatively higher margin pressure due to its cost structure and product mix, he added. 

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