 "Steel stocks: Near-term relief, outlook muted")
Steel majors JSW Steel, Tata Steel and SAIL gained between 1.5 and 5.5 per cent on the bourses on Monday. This was on expectations that more steps could be taken by the government to protect the interests of domestic steel players. Among the beneficiaries of the government’s move on Friday to impose anti-dumping duty ranging from five to 57 per cent on import of cold-rolled flat products of stainless steel for five years is Jindal Stainless. The scrip gained 11.7 per cent to close at Rs 30.1 on Monday. The duty is applicable on cold-rolled stainless steel imports originating from China, South Korea, European Union, South Africa, Taiwan, Thailand and the US. This is the second major policy announcement for the domestic stainless steel sector and follows an imposition of anti-dumping duties between $180 and $316 a tonne for a five-year period on import of industrial-grade stainless steel from specific countries.
While the sentiments of the Street might have become positive, the fundamentals of steel industry still remain weak. Also, the exact benefits that can flow for steel majors will be only evident once further measures are announced. What duty is implemented and categories of products that are brought into its ambit will decide the extent of benefits. Currently, many product categories from semi-finished products to bars and rods are believed to be under consideration. Many analysts believe that import restrictions help countries in the short run. Analysts at HSBC say import restriction, if implemented, can stem the inflow of material from China, although these are temporary in nature. Also, this is unlikely to alter the economic deterioration of the commodity cycle. The international iron-ore prices that were on a down trend have now touched $38 a tonne. This will continue to exert pressure on steel prices.
HSBC has a ‘reduce’ rating on Tata Steel and SAIL and ‘hold’ rating on JSW Steel. Tata Steel and SAIL are integrated players and hence in an environment of low raw material prices, they lose their competitive strength. Compared to them, JSW Steel is dependent on external sources for basic raw materials iron-ore and coal and benefits from lower prices of these commodities.
While the sentiments of the Street might have become positive, the fundamentals of steel industry still remain weak. Also, the exact benefits that can flow for steel majors will be only evident once further measures are announced. What duty is implemented and categories of products that are brought into its ambit will decide the extent of benefits. Currently, many product categories from semi-finished products to bars and rods are believed to be under consideration. Many analysts believe that import restrictions help countries in the short run. Analysts at HSBC say import restriction, if implemented, can stem the inflow of material from China, although these are temporary in nature. Also, this is unlikely to alter the economic deterioration of the commodity cycle. The international iron-ore prices that were on a down trend have now touched $38 a tonne. This will continue to exert pressure on steel prices.
HSBC has a ‘reduce’ rating on Tata Steel and SAIL and ‘hold’ rating on JSW Steel. Tata Steel and SAIL are integrated players and hence in an environment of low raw material prices, they lose their competitive strength. Compared to them, JSW Steel is dependent on external sources for basic raw materials iron-ore and coal and benefits from lower prices of these commodities.