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Our Bureau

Mumbai, Sept. 10 Metal stocks slid on the bourses on Wednesday as talks of a cut in steel prices gathered momentum. A little before the trading session ended, there was indeed such a development, as JSW Steel said it had cut prices by around 5 per cent, effective September 1.

The BSE-Metal index slid by 5.48 per cent and was the biggest loser amongst the sectoral indices.

Steel prices have been going down globally, leading to negative sentiments here towards the metal stocks, said Mr Gaurav Dua, Head of Research, Sharekhan Ltd.

Falling global prices mean that domestic manufacturers will have to match imports in price. At the same time, input costs remain high, and this is putting their margins under pressure and impacting profitability, said analysts.

Contract prices of key raw materials for steel, such as iron-ore and coking coal, have increased by around 65 per cent and 200 per cent on a year-on-year basis, respectively, says an Indiabulls research report on Tata Steel.

Nevertheless, till now steel manufacturers have been able to maintain margins as they were able to pass on the increase in costs to the customers due to the strong demand for steel. Going forward, a weak global demand scenario will result in falling steel prices, the report states.

At the AGM of SAIL on Wednesday, the Chairman, Mr S.K. Roongta, had said that “moderating prices in spite of substantial increases in input costs and yet maintaining margins to generate resources for further investments, is going to be a tough challenge for the steel players”.

Another factor that pulled down metal stocks was the announcement of the restructuring plans of Vedanta Group, parent company of Sterlite. On Wednesday, the stock (which slid 7.5 per cent on Tuesday) was amongst the biggest losers on the bourses, losing 11.78 per cent. It carries a weight of 12.94 per cent in the BSE-Metal index.

Moody’s Investor Services have placed a corporate family rating on Vedanta Resources on review for possible downgrade, said Mr Alex Mathew, Head (Research), Geojit Financial Services.

Amongst the other metal stocks which fell substantially were Jindal Steel, which lost 8.04 per cent, Gujarat NRE Coke Ltd (7.58 per cent), JSW SL (7.48 per cent), SAIL (6.50 per cent), NMDC (4.01 per cent) and Hindustan Zinc (4.33 per cent).

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