ArcelorMittal’s weak guidance adds to woes

Steel company stocks were battered on the bourses with no signs of demand revival in the near future. The first quarter results, announced by some of the metal companies recently, were also not encouraging.

The BSE metal index was down 157 points 10,484. Jindal Steel plunged four per cent to hit a 52-week low before closing at Rs 397. SAIL and Tata Steel were down four per cent and two per cent at Rs 85 and Rs 387. Sesa Goa, which reported a sharp drop in Q1 profit, dipped one per cent at Rs 183 and JSW Steel slipped 0.08 per cent to Rs 669.

Difficult times

The market took cue from the tough guidance given by ArcelorMittal, the world's largest steel producer. The guidance report noted that steelmakers globally were struggling with falling demand in Europe and Japan and slowing growth in China, the world's largest producer and consumer.

The difficult market conditions would continue into the second half of the year, particularly in Europe where it lowered its consumption forecast due to the severity of the slowdown.

Global crude steel production declined 2.5 per cent to 127.9 million tonne as compared with month-on-month in June. This was due to the two per cent fall in China’s production. In Europe and North America, it was down four and six per cent.

Economic slowdown

Mr Jagannadham Thunuguntla, Strategist & Head of Research, SMC Global Securities, said besides the overall bearish trend in market, the economic slowdown in the US and Europe has taken a toll on metal company stocks.

JSW Steel is to announce its first quarter results on Thursday. Hindustan Zinc, which announced its results recently, reported six per cent increase in net profit largely due to the substantial jump in other income. Its mined metal production in the quarter was down marginally, while zinc output fell by 16 per cent to 1,61,000 tonnes.

(This article was published on July 25, 2012)
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