The Hindu Business Line : Steel stocks jump on price hike

A HIKE in long steel product prices by around Rs 1500 per tonne saw steel shares rally on the bourses. While the feel good factor generated by this encompassed even those companies not in long steel products, brokers maintain that a recovery was on the cards.

"It was a knee-jerk reaction to a statement made by the Chinese premier. Fundamentally, nothing has changed in the steel sector. Yes, the China factor has to be looked at closely but the next six months are not gong to see any dramatic changes in steel prices. Raw material prices will continue to provide a firm base to steel prices," a leading market participant said.

On the upswing today were stocks of Essar Steel, Ispat Industries, Jindal Iron, SAIL, Sesa Goa, Tata Steel amongst others.

Tata Steel officials, while confirming that prices for long steel products were on a upturn, refused to comment on whether Tata Steel was looking to hike prices.

On their part, HR producers seemed to be bound by their resolve not to raise prices, industry sources said.

Fears of a slowdown in Chinese demand, on account of the country taking steps to cool down its heated economy, have been dogging steel stocks in the recent past. Yet, market sources opine that if the NDA Government were to come back to power, one could expect economic reforms to gather pace. "This would mean that steel prices will rule firm on a Y-o-Y basis in the domestic and global market following sustained infrastructure activity being carried out," an analyst tracking the company said.

According to analyst, Mr Jigar Mistry of Prabhudas Liladher, it was very well understood that a 30 per cent increase in investment year-on-year cannot come from a country growing at a GDP of 10 per cent. As such slowdown was imminent. But even so, over a period of 8-10 years a growth rate of 6-8 per cent can be pursued and as such in the long term things continue to look good," he said.

Besides, the forecast for the input industry such as iron ore and met coke etc look good.