Steel Stocks Outlook: Down next week as price worries remain

[B. Karthick]

Steel Stocks Outlook: Down next week as price worries remain
Saturday, Aug 9

Steel stocks may continue to slide next week on concerns over the
government's relentless posturing against steel product prices.
The steel companies' three-month-long self-imposed moratorium on
prices ended Thursday but the government has asked them to continue
with the price freeze.
Steel Secretary P.K. Rastogi urged the steel companies to keep
prices on hold till the time inflation comes down. "There is no time
limit (for the freeze on prices)," Rastogi said.
Leading stocks shed weight this week, with Tata Steel Ltd. losing
4% and Jindal Steel and Power Ltd. falling more than 2%, even as
benchmark indices Nifty and Sensex climbed.
Steel Authority of India Ltd., however, bucked the trend, rising
about 1%.
India's latest headline inflation rate stood at 12.01% for the
week ended Jul 26. The Reserve Bank of India is aiming to bring
inflation to close to 7% by the end of March.
With the rainy season, there is already some dampening in demand.
This means lower sales volumes. The freeze on prices is making matters
worse.
Steel companies said their expansion plans might suffer if the
restriction on prices continues.
"Our near term capacity expansion plans will not be hurt, as we
have tied up the finances. But the longer term plans may suffer if
prices are not firm," Sajjan Jindal, managing director of JSW Steel
Ltd., said.
Investors in steel stocks may draw some comfort, as the government
initiates the process of sorting out companies' issues regarding
availability of iron ore.
A committee comprising representatives from steel and mining
industries and government officials is likely to meet soon to discuss
long-term iron ore supply contracts for steel companies and
conservation of the mineral for domestic industry.

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

Company Closing Level Closing Level %
Change
Aug 8 Aug 1
Steel Authority 145.70
144.50 0.8%
Tata Steel 652.45
679.85 - 4.0%
JSW Steel 794.60
797.90 - 0.4%
Jindal Steel & Power 2070.95 2117.60 -
2.2%

Nifty 4529.50
4413.55 2.6%
Sensex 15167.82
14656.69 3.5%

End

B.Karthick
Research Analyst.