Steel counters gleam as prices, profits rise

Steel manufacturers are in focus on the bourses with most of them posting excellent results in the first quarter ended June 30, 2004.

The dream run is likely to continue with domestic companies having just raised local prices in sync with the global trend, where there has been a spike in the last couple of days.

Analysts said firm domestic demand "" especially from the construction and automotive sectors "" has enabled the steel companies to increase hot-rolled coil (HR coil) prices by around Rs 500-1,000 per tonne to Rs 28,500- 29,000 per tonne.

Demand for steel in the first quarter grew by an average 5 per cent, while growth for the current quarter is seen at about 6 per cent.

Analysts said that in terms of price realisations, the industry has never had it better.

While hot-rolled coil prices are expected to touch the Rs 30,000 per tonne mark in the next few weeks, prices of long products have remained in the Rs 25,000- 26,000 per tonne band.

Steel counters were in the limelight on Tuesday despite the overall market closing in negative territory.

Sensex constituent Tata Steel rose 1.27 per cent to Rs 396.20, off its day's high of Rs 401.90 on profit booking at higher levels.

Other non-Sensex counters Kalyani Steels surged 10.29 per cent to Rs 60, Jindal Steel was up 5.32 per cent to Rs 603.20, Essar Steel was up 0.90 per cent to Rs 28, Bhushan Steel gained 0.79 per cent to its 52-week high of Rs 126.65, while the Steel Authority of India scrip fell 0.88 per cent to Rs 39.20, off its day's high of Rs 40.30 on selling at higher levels after early gains.

A senior executive of a leading steel company said global steel prices have been going up sharply in the last few days, which has encouraged domestic steel companies to increase prices.

"The demand in the domestic market is also very buoyant and this will help to absorb the price hike and sustain it," he added.

Global steel prices have been on the rise since mid-July due to a shortage of supplies. In the US market, hot-rolled coil prices have zoomed to $750-800 levels, more than double the prices seen a year back.

Analysts tracking the sector said there is a strong revival of demand in the US market, while demand in Europe has been firm.

An industry observer said the Chinese, too, have returned to the global market and it will not be long before prices in China also pick up.

Current prices in Europe are around $630-650 per tonne, while in China, hot rolled coil prices are in the $570-$600 range.

Red hot

• Domestic companies have just raised local prices in sync with the global trend
• Domestic demand is seen going up by 6 per cent in the current quarter, it went up by 5% in the previous quarter
• China has also returned back to its buying ways in the global market, certain to give a push to steel prices