The Hindu Business Line : Steel counters in limelight

According to dealers, the sector leaders mainly attracted value-based buying; smaller players also benefited from a trickle-down effect. The domestic steel sector witnessed a sparkling fiscal in 2003-04 after a long cyclical downside.

In an otherwise lacklustre market, steel stocks were in demand on the back of news that the spot prices of long products and semi-finished steel have been attracting premia ranging from Rs 1,000 to Rs 2,500 per tonne depending on the product. The cause for the rise in prices of long products was attributed to enhanced demand from the construction sector, Mr Ketan Thacker of Angram Stockbroking pointed out.

"The sector is delicately poised at present. The current market revaluation exercise could be attributed to expectations of a better result also," commented Mr Ravi Chenoy of HDFC Bank.

Though large consuming industries, such as automobiles and construction, have been lobbying against further price rise by the domestic steel producers, market expects an upward revision of steel products after elections. "Major steel producers are also expected to renegotiate long-term contracts. Global demand for steel continues to be firm. However, availability of high quality iron ore and coking coal remained tight," Mr Chenoy pointed out.

According to estimates, China continues to spur global demand for steel and would need an additional 20 m.t. every year. Domestic demand-supply gap is also expected to continue for the next few years. The demand for steel in the country is projected to be 38 m.t. by 2006-07 and 52 m.t. by 2011-12. SAIL has planned enhancement of its hot metal output to 20 m.t. by 2011. Others, including Tisco, have drawn up plans to increase output and cut costs.

The prospects of Coal India, Tata Steel and SAIL jointly owning coal mines in countries such as Australia, Indonesia, Canada, the US and South Africa, with all three holding stake, have enthused a section of investors. Among the stocks that buoyed up with volume increase today were Tata Steel (up 1.8 per cent), SAIL (2.6 per cent), Jindal Steel (1.43 per cent), Mahindra Ugine Steel (10 per cent), Ispat Industries (6 per cent) and Essar Steel ( 12.2 per cent).