The Hindu Business Line : Steel stocks fall on China slowdown

STEEL companies stocks witnessed large-scale selling in today's trading on concern of slowdown in Chinese economy and fears that exports to China could decline.

Among the stocks that dropped in today's trading were; Tata Steel (2.77 per cent at Rs 382.70 on the BSE), SAIL (1.18 per cent at Rs 62.60), Essar Steel (4.33 per cent at Rs 51.90), Jindal Steel (2.52 per cent at Rs 1046.20), Jindal Vijaynagar (1.54 per cent at Rs 368.50).

Brokers said the sudden fall in steel stocks came as a surprise as from April 1 onwards most of the steel companies had hiked steel prices. But several analysts tracking the sector said the steel price cycle has almost peaked and from this level it is likely to fall.

Other factors leading to fall in steel stocks is slowdown in China, which could lead to lower demand for steel. This in turn could bring down steel prices.

However, CLSA, a leading foreign broking firm, said the demand for steel in China would continue to grow through the end of the decade.

It said there is increase in steel production in China and most of this mainly for import substitution.

Analysts in India said the import substitution by China is the biggest fear for Indian companies as a major portion of steel exports from here are to that country. "What will happen if China lowers steel imports," questioned an analyst with a foreign broking firm.

He said the current ruling market price for most of the steel stocks has factored growth for steel companies in 2005-06, but those expectations might not be achieve.

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