The Hindu Business Line : Steel stocks slip despite price hike talk

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Kolkata March 2 Why steel stocks melted on Dalal Street Friday when apparent news flows indicated that a number of positives were stacked up for the sector?

According to market analysts, the assumed benefits that may emanate from the Budget proposal may not translate into reduction of cost. Also, there were apprehensions that the Government might put pressure on the steel makers to partly roll-back the price increase already effected this month at the dealers level to the keep inflationary trend under check

The steel counters today finished lower, some market observers felt, because the anticipated price rise had already been factored in.

Dealers said they were flooded by investor queries whether the monthly price rise was officially announced by the steel makers. When contacted by Business Line, a Tata Steel official confirmed that "non-contract" HR coil price has been raised by around Rs 1,000 per tonne.

According to Mr Arun Kejriwal, a market analyst, the general pressure on liquidity in March is largely dictating the valuations on the Street. "Market usually reels under liquidity squeeze this month for tax-related payments," he said.

He, however, said the global price trend in steel would ultimately determine the profit growth for the local steel companies in the next few quarters. According to him, the Budget proposals related to import duty reduction on coking coal or seconds/defective steel are unlikely to cut pressure on cost.

On the global arena, Arcelor Mittal and Corus have already raised their product prices, the Chinese and the Japanese steelworks are anticipated to announce price hikes later this month. A Singapore based steel analysts said that Japanese steel company Nippon has raised its profit forecast by 11 per cent this week in view of strong global demand.

According to Mr Rajesh Agarwal of CD Equisearch, the Budget proposals on export duty hike for iron or chrome ore exports may not have any serious positive influence on the steel stocks at the level of EPS.

Among the steel counters, Tata Steel closed 2 per cent down at Rs 443, while SAIL declined by 3 per cent at Rs 106. Except for Essar Steel, which finished flat, others such as JSW, Ispat Industries and Jindal Steel slumped.