Steel shares trade firm; Jindal Steel, Tata Steel, SAIL rally up to 5%

Shares of steel companies are trading higher by up to 5 per cent on the BSE in Tuesday’s intra-day trade in an otherwise range bound market after steel imports in November’ decreased by 28 per cent month-on-month (MoM) and 32 per cent year-on-year (YoY) to 0.75 million tonnes (MT), whereas steel exports declined by 11 per cent month-on-month and, while climbing 71 per cent year-on-year to 0.40 MT.

 

The sequential decline in steel imports can be attributed to government enforced quality checks in November, benefiting domestic steel players. Additionally, the Chinese government’s commitment to adopting more proactive fiscal policies and moderately relaxed monetary policy in 2025 is likely to boost domestic consumption there, which could potentially limit steel exports from the country, according to ICICI Securities.

 

Consequently, this will provide a relief to domestic steel players given the rising imports from China has pushed the domestic steel prices to a three year low of approximately Rs 48,000 per tonne. Thus, the brokerage firm said they remain positive on this sector with JSW steel emerging as their top pick due to its strategic capacity expansion, favourable steel demand domestically and anticipated profitability improvements.

 

Among the individual stocks, Jindal Steel & Power has rallied 5 per cent to Rs 1,011.45. Tata Steel (Rs 152.50) and Steel Authority of India (SAIL) (Rs 128.50) are up 2 per cent each, while JSW Steel has gained 1 per cent at Rs 1,023 on the BSE in intra-day trade. 

 

At 10:59 AM, the BSE Metal index, the top gainer among sectoral indices, was up 1 per cent, as compared to the 0.09 per cent rise in the BSE Sensex.

 

Analysts expect H2FY25 to be better than H1, aided by healthy demand, stable steel prices and lower coal prices.

 

India’s hot-rolled coil (HRC) steel prices were stable week on week as well as month-on-month (MoM). They are now at par with import prices from China. The Indian government is studying the industry's request for a temporary tax plea on steel imports from China, analyst at BNP Paribas said in a November 25, 2024, report.

 

Meanwhile, JSW Steel reported a steady volume print for November 2024. The company's Indian operations reported crude steel production of 2.25 million tonne (up 7 per cent year-on-year (YoY)) with total group combined volumes standing at 2.3 million tonnes (up 5 per cent YoY). Capacity utilisation for Indian operation was at 94 per cent.

 

With robust demand in domestic markets, higher volumes from new capacities, and reduced coking coal costs, earnings before interest, tax, depreciation and amortisation (Ebitda) per tonne is expected to improve for JSW Steel in the coming quarters. With a strategic capacity expansion in place, favourable domestic steel demand and improvement in profitability, JSW Steel is positioned to achieve record performance going forward, according to analysts at ICICI Securities. The brokerage firm has a ‘Buy’ rating on the stock, with a target price of Rs 1,130 per share.