Steel Sector Report for the week (09 - 13.07.2012)

[rupeedesk]

Steel Sector Report for the week (09 - 13.07.2012)

Stocks of steel companies are likely to fall next week as local and global demand for the metal is weak. Although demand for steel grew at a robust pace in the first two months of this financial year, it may slow in the coming months because of southwest monsoons. In Apr-May, steel consumption in India grew 8% from a year ago to 11.80 mln tn, the steel ministry's joint plant committee said in a report. Construction activity usually comes to a halt during the monsoons, affecting demand for steel in the local market. Demand from the automobiles sector, another key consumer of the metal, has remained sluggish as several manufacturers are resorting to production cuts. Also, the Society of Indian Automobile Manufacturers has lowered its estimates on growth of passenger car sales in the country. Global demand for steel remains weak due to worries over the economy of the Eurozone, and slowdown in industrial activity in China. Global prices of steel continued their fall this fortnight due to weak demand and high output.

This week, domestic steel companies got some relief as some iron ore mines of Karnataka are expected to resume operations next month. Steel companies were facing severe shortage of iron ore after mining in the state was banned last August. These mines are likely to produce 6 mln tn iron ore annually. Companies such as JSW Steel, and Kalyani Steels, which had to cut production in the past one year because of ore shortage, expect their operations to return to full capacity in two-three months. Steel companies reporting flat-to-slightly positive growth for Apr-Jun. Sequential improvement in the companies' profitability due to increase in long and flat product prices, ICICI Securities expects their realisations to remain flat.

By RUPEE DESK

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