Steel shares rally on possible price hike

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 (SAIL) leading the pack. The stock appreciated 4.63 per cent on the BSE and closed at ~126.55. JSW Steel closed at ~710.55, Jindal Steel & Power (JSPL) at ~407.25, and Tata Steel at ~1125.65.

Steel firms are understood to be considering an increase in prices over the next few days. Also, Chinese steel futures have 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 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 (hotrolled coil) from China is at ~77,000 a tonne compared to ~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.

The 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 iron ore prices or other input costs increase abruptly.” 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 amid localised 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 midjune and July. There is demand from infrastructure segment and some construction activity has started.” Even as domestic demand impacted due to the second Covid wave, export markets were strong. Dhar said the three major destinations were Europe, Southeast Asia and West Asia.

Steel prices have seen an unabated increased since November last year except for a pause in February.

Chinese futures in the last two trading sessions have been up by $50-$60 a tonne