Steel Stocks Outlook: Dn next wk as govt steps in to rein in price

[B. Karthick]

Steel Stocks Outlook: Dn next wk as govt steps in to rein in price
Saturday, Jul 5

Investors in steel shares do not have any reason to be
optimistic next week, thanks to government's efforts to control prices
in the backdrop of rising inflation and record-high crude oil prices.
It is unlikely that investors in steel shares will get any
respite. The
scenario for the overall market looks bleak and steel is expected to
be
among the worst performers, thanks to regular government intervention
and rising input costs.
The government Thursday said it expects steel product prices to
ease in a week after pipe manufacturers announced a 10% cut in prices
and primary steel producers agreed to lower exports to raise domestic
supplies.
Government's statement came after meeting primary and secondary
steel makers the same day to discuss measures to check the rise in
retail prices of steel products.
Steel pipe producers said they will cap prices at 48,000 rupees a
tn.
"The measures taken by primary steel producers are expected to
show results in a week's time," Steel Secretary R.S. Pandey said.
Pandey said steel exports in Apr-Jun stood at 0.9 mln tn, compared
with 1.3 mln tn in the year-ago period.
"There has been a perceptible decline in exports but they have to
further decline. Hoarders and speculators have to be beaten," Pandey
said.
Steel exports have declined after government threatened to levy
export duty or ban exports in a bid to augment domestic supplies and
lower prices.
Early May, government had coerced primary steel producers to hold
their price line for three months. Yesterday, the companies said they
may extend the price freeze beyond July, if required.
According to the latest data released yesterday for the week
ending Jun 21, inflation scaled a new 13-year high of 11.63% from
11.42% in the previous week.
This is the highest inflation rate since the Wholesale Price Index
series was introduced in 1994 and more than double Reserve Bank of
India's Mar-end projection of 5.5%.
Steel shares fell far more than the benchmark indices, Nifty and
Sensex, this week. JSW Steel fell the most, 23.3% to 752.85 rupees.

Week-on-week closing prices of key steel companies' shares, in
rupees, on National Stock Exchange:
.
Company Closing Level Closing Level % Change
Jul 4 Jun 27
.
Steel Authority 127.85 144.20 (-)11.3%
Tata Steel 640.40 726.75 (-)11.8%
JSW Steel 752.85 981.45 (-)23.3%
Jindal Steel & Power 1,686.25 1,843.60 (-)8.5%
.
Nifty 4016.00 4136.65 (-)2.9%
Sensex 13454.00 13802.22 (-)2.5%
.
End

B.Karthick,
Research Analyst.