Steel Stocks Outlook: Seen down next wk on price cut expectations

[B. Karthick]

Steel Stocks Outlook: Seen down next wk on price cut expectations
Saturday, Sep 27

Shares of steel companies are likely to slide next week,
reflecting gloomy sentiments over the declining global economy. Steel
companies are expected to cut product prices next month to tackle
cheaper imports.
Nothing seems to be going right for the industry. It's a
depressing phase for investors.
This week steel stocks saw sell-offs across the board. Jindal
Steel & Power Ltd., which fell 11.6%, led the decline. Market leader
SAIL, which lost 9.7%, was the second biggest loser among steel
majors. In perspective, benchmark indices slid over 6% during the
period.
Steel Minister Ram Vilas Paswan Thursday said he expected domestic
steel prices to come down further from the current levels.
Corroborating his views, JSW Steel Ltd. Managing Director Sajjan
Jindal said his company will cut prices, as global prices are on the
decline.
Both Paswan and Jindal did not estimate the possible reduction in
prices.
After having kept domestic retail prices on hold for the last five
months, steelmakers are finding themselves in a spot, as demand begins
to shrink and imports get cheaper.
Cornered, steel companies are now demanding re-imposition of the
5% import duty that was abolished in the wake of rising inflation in
April.
It looks like there is an immediate need to curb imports or very
soon companies will have to curtail production.
All this leads to a pessimistic earnings forecast for the steel
companies.
"The second quarter looks quite bleak," a steel company official
said.
Despite the bleak outlook, the broader markets, may get a kiss of
life, provided the U.S. government sanctions a satisfactory bailout
package for the U.S. financial system.

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

Company Closing Level Closing Level Change
Sep 26 Sep
19 in %
Steel Authority 133.35 147.70 -
9.7%
Tata Steel 461.85 479.50
- 3.7%
JSW Steel 574.20 593.95 -
3.3%
Jindal Steel & Power 1,312.10 1,484.25 - 11.6%

Nifty 3985.25 4245.25
- 6.1%
Sensex 13102.18 14042.32 -
6.7%

B.Karthick
Research Analyst.