Steel Stocks Outlook: Seen down next week on inflation worries

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B. Karthick

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Aug 23, 2008, 4:16:02 AM8/23/08
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Steel Stocks Outlook: Seen down next week on inflation worries
Saturday, Aug 23

Steel shares are likely to slip further next week, as worries
over accelerating inflation weigh on investor sentiments.
India's headline inflation climbed to a fresh 13-year high of
12.63% for the week ended Aug 9, from 12.44% in the earlier week.
A spurt in inflation has stoked speculation that Reserve Bank of
India might raise key rates further, making funds costlier for
companies.
Rising interest rates will soon begin to thwart investment plans,
and that is bad news for the steel sector.
Steel companies are facing a two-pronged attack on prices, with
the
government maintaining a hawkish stance.
Steel Secretary P.K. Rastogi Thursday told that the government
will ensure steel is available in the country at "reasonable rates".
"The situation is getting increasingly difficult, as demand is
slowing and prices are on hold," a steel ministry official said.
Global fall in prices is also worrying, as export revenues will
come down, mainly for galvanised and long product makers.

ORE SECURITY
Some good news, though, may be awaiting steel companies, as they
negotiate issues regarding supply of iron ore with miners.
Both parties met yesterday in Bangalore and will meet next week in
Kolkata to arrive at some consensus on long-term supply contracts,
prices of the input material, and exports.
There is some hope for companies, such as Ispat Industries Ltd,
JSW Steel Ltd and Bhushan Steel and Power Ltd, which do not have
captive mines in India.
Expectations that SAIL may get the Supreme Court's clearance for
its Rowghat mines in Chhattisgarh very soon is likely to keep the
stock active.
SAIL shares rose 4.7% this week, while its peers Tata Steel Ltd,
JSW Steel Ltd, and Jindal Steel & Power Ltd fell.

Week-on-week closing prices of key steel companies' shares, in
rupees, on National Stock Exchange:

Company Closing Level Closing Level % Change
Aug 22 Aug 14
Steel Authority 150.20 143.40 4.7%
Tata Steel 593.75 616.50 - 3.7%
JSW Steel 763.15 771.10 - 1.0%
Jindal Steel & Power 1,917.35 1,920.00 - 0.1%
Nifty 4327.45 4430.70 - 2.3%
Sensex 14401.49 14724.18 - 2.2%

B.Karthick
Research Analyst.
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