The Hindu Business Line : Steel stocks in the limelight

Mumbai, Feb. 1 It was a field day for the topline metal stocks listed on the BSE as the markets were abuzz with unconfirmed news that steel companies may hike prices by as much as Rs 2,000 per tonne to tide over increasing raw material costs such as iron ore and coking coal.

In a late evening development, Tata Steel announced a Rs 2,000 to Rs 2,500 per tonne hike in prices of hot-rolled, cold-rolled and galvanised steel. The hike was necessitated due to rise in input cost, a company official said.

Raw materials

The sentiments were further boosted by the Government-owned Aluminum Corp of China (Chinalco) joining hands with American aluminium giant Alcoa to buy 12 per cent stake in Anglo-Australian miner Rio Tinto for $14.05 billion.

Among major steel companies, JSW Steel rose 7.31 per cent to Rs 1,037, Hindalco 6.73 per cent to Rs 177, Tata Steel 5.86 per cent to Rs 776, Steel Authority of India 5.46 per cent to Rs 226 and Bajaj Steel Industries rose 5 per cent to Rs 203.

“Prices of iron ore and coking coal cost, one of the important raw materials for steel making, have gone up nearly 22 per cent this year. With good demand, it will be prudent for the companies to pass on the cost to the customers,” said an analyst.

Strong Demand

Except for Tata Steel and SAIL, other major steel companies depend on imported coking coal, prices of which have gone up substantially in the international market.

“The strong demand and soaring input cost have led to a sharp rise in the finished steel prices. Negotiations for 2008 iron ore and coal procurement signals that there will be a sharp rise in these prices too. With this backdrop, it is expected that new highs will be seen in the steel prices in 2008,” JSW recently said.

Global development

Teaming up of Chinalco and Alcoa has blocked world’s largest miner Anglo-Australian, BHP Billiton to buy Rio Tinto. “The two aluminium producers probably want to block a combined firm (BHP Billiton and Rio Tinto) that would control a third of the iron ore market and dominate markets for copper, aluminium and coal,” said an analyst.

Alcoa and Chinalco said they do not currently intend to make an offer for the whole of Rio Tinto, but added that they reserved the right to do so if Rio received a firm bid from a third party, according to recent reports. The offer comes just before a February 6 deadline for BHP to make a firm offer for Rio or shelve plans for six months.