Steel Stocks Outlook: Down next week as cos hint at price cuts

[B. Karthick]

Steel Stocks Outlook: Down next week as cos hint at price cuts
Saturday, Sep 6

The worst fears are coming true for India's steel industry and
investors
in steel companies' shares. Having kept retail prices unchanged for
nearly
four months, steel companies now face pressure to cut prices as signs
of
slowing demand emerge.
Shares of steel companies are likely to fall further next week, as
concerns over softening prices, high costs, and waning demand from
key
customer industries such as auto and construction may force investors
to sell
off.
This week, the decline in steel shares was led by JSW Steel Ltd, as
the
company's stock shed 7% of its value. Industry leaders Steel Authority
of
India Ltd and Tata Steel Ltd followed with declines of 6.4% and 6.7%,
respectively.
There is tremendous pressure on steel shares. With economic growth
slowing, steel industry is seen being directly impacted.
The government has been insisting that Indian companies should bring
down
their prices in line with the recent fall in global prices on account
of
slumping demand in Europe and the U.S.
The price correction in Europe was overdone and listed out some
catalysts
that could push Tata Steel shares. Despite the demand slowdown in
Europe,
inventory levels are low and fear of Chinese imports is receding.
Tata Steel's Europe subsidiary, was in a position to pass on much of
its
cost increases during the September quarter.

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

Company Closing Level Closing Level % Change
Sep 5 Aug 29
Steel Authority 146.15 156.10 - 6.4%
Tata Steel 560.35 600.70 - 6.7%
JSW Steel 710.55 764.00 - 7.0%
Jindal Steel & Power 1,799.90 1,906.60 - 5.6%

Nifty 4352.30 4360.00 - 0.2%
Sensex 14483.83 14564.53 - 0.5%

End

B.Karthick
Research Analyst