Analysis on Steel Stocks

Steel is what builds the nation and given the way India has made a name for itself in the steel arena, through global acquisitions, there is always a lot of fancy on the bourses for big steel companies. But over the past few days, there has been a lull in the stock prices and as the market always knows first and the best, we got to the bottom of the pile for the reason.

What comes forth is that steel stocks have lost their sheen as steel prices are expected to soften in September as spot hot-rolled coil prices (HRC) in overseas markets have currently come down to $950 (Rs 40, 850) per tonne, as against $1,150 (Rs 48, 875) levels in mid-July, due to sluggish construction demand in China and the US. Usually, companies announce or review their selling prices in the first week of September and till date there has been no news from any of them – Tata Steel, JSW Steel, Essar Steel. The domestic companies are in a quandary, they have taken a hit on their bottomoines in Q1 by not raising the prices when crude prices touched the sky, at the behest of the Govt. And now, its operating costs remain high and when it is finding it difficult to sustain at the current prices, how will it bring down the prices further?

Infact a look at the long term contracts entered into by these companies indicates that they have infact raised their prices. So what is the verdict for steel stocks now? Long term looks good but Q2 will be tough.
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