Steel Prices Stabilize Amid Festive Season Slowdown

Steel Prices Stabilize Amid Festive Season Slowdown

VoM News Desk | November 17, 2023 | 06:23 PM IST | Breaking News | Follow on Google News

Steel Prices Stabilize Amid Festive Season Slowdown

Steel Prices Stabilize Amid Festive Season Slowdown

Steel prices, which had been on a consistent rise during the September quarter, experienced a pause during the festive season, largely attributed to several market dynamics.

Factors Influencing the Price Stabilization

A combination of factors has led to this stabilization in steel prices:

1. Reduced Buying Activity: The Diwali holidays contributed to a slowdown in purchasing activities.
2. Higher Imports: An increase in steel imports exerted downward pressure on prices.
3. Absence from Export Markets: Steel mills’ notable absence from the export markets also influenced prices.
4. Need-Based Purchasing: Customers adopted a more cautious, need-based approach to buying steel.

Analysts’ Outlook on Steel Demand

Despite the temporary pause in price hikes, analysts from Motilal Oswal Financial Services maintain a positive outlook on steel demand. They anticipate that ongoing infrastructure spending will continue to support volume growth in 2023 and 2024. They also expect a revival in steel prices post-Diwali.

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Quarterly Performance and Earnings Upgrades

At the end of the September quarter, steel prices were higher than at the start of Q2, which should help offset the higher raw material costs, particularly coal. The Q2 performance led to significant earnings upgrades for major steel companies like JSW Steel and Tata Steel.

Average Selling Price and Cost Expectations

Jindal Steel and Power (JSPL) expects a 2-3% increase in average selling price (ASP) in Q3FY24, driven by domestic market demand. Tata Steel anticipates an improvement in ASP by ₹2,000-2,200 per tonne for its domestic operations. However, both companies expect a rise in coal costs, which will impact profitability.

Analysts’ Positive Views on Major Steel Companies

Analysts from JM Financial Institutional Securities maintain a positive outlook on major steel companies post-Q2 results:

• Tata Steel: Expected to continue steady performance in domestic operations.
• JSW Steel: Strong growth pipeline and increased focus on cost efficiency are seen as positive.
• JSPL: With a strong balance sheet, increasing raw material security, and low production costs, JSPL is well-positioned to withstand cyclical challenges.

VoM News Desk

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