Steel Stocks Outlook: Seen lower next week on rising input costs
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K.Karthik Raja
Feb 23, 2008, 2:20:59 AM2/23/08
to Kences1
Steel Stocks Outlook: Seen lower next week on rising input costs
NEW DELHI - Worries over rising input costs squeezing margins in
the steel business may prod investors to sell their shares in steel
companies.
Benchmark iron ore prices are set to rise by 65-71%--depending on
the grade--from Apr 1, as more industry leaders agree to Brazilian
miner Vale's proposition.
So far, Japan's Nippon Steel, Korea's POSCO, Germany's
ThyssenKrupp, China's Baosteel and Italy's Ilva have agreed to Vale's
price hike plans.
Indian state-owned miner NMDC Ltd. has said it would raise prices
by 65% beginning April.
Coking coal prices are already touching the roof. On top of this,
the
quantum rise in iron ore prices is a big worrying signal for
steelmakers,
particularly those that do not have captive resources.
Steel Authority of India Ltd., Tata Steel Ltd., JSW Steel Ltd. and
Jindal Steel and Power Ltd. are certainly better placed than others as
they hold leases for iron ore mines.
But even these companies are not insulated to volatile input
prices, as all of them depend on imports of coking coal, the second
most important raw material for making steel.
Steelmakers do have an option of raising prices to save their
margins, but steel prices beyond a level may be discomforting for a
government that is preparing for elections next year.
High steel prices have a cascading impact on the country's
wholesale price index-based inflation rate.
The headline inflation rate for the week ended Feb 9 climbed to
4.35% from 4.07% a week ago, disturbingly close to breaching the
government's comfort zone of 4.5%.
Concerned over high steel prices, the government asked companies
to partially roll back their prices earlier this month. It may repeat
its demand, many fear.
"Steelmakers are caught in a double whammy, and it is not an
encouraging sign for investors," an official from a steel company
said.
Early this month, steel companies hiked product pries by
2,000-2,500 rupees a tn.
.
The week-on-week closing prices of key steel shares, in rupees, on
National Stock Exchange:
.
Company Closing Level Closing Level % Change
Feb 22 Feb 15
.
Steel Authority 238.65 220.80 8.1%
Tata Steel 804.70 818.15 -1.6%
JSW Steel 1,115.05 1,187.80 -6.1%
Jindal Steel & Power 2,293.50 2,327.45 -1.5%
.
Nifty 5110.75 5302.90 -3.6%
Sensex 17349.07 18115.25 -4.2%
K.Karthik Raja
www.kences1.blogspot.com
NEW DELHI - Worries over rising input costs squeezing margins in
the steel business may prod investors to sell their shares in steel
companies.
Benchmark iron ore prices are set to rise by 65-71%--depending on
the grade--from Apr 1, as more industry leaders agree to Brazilian
miner Vale's proposition.
So far, Japan's Nippon Steel, Korea's POSCO, Germany's
ThyssenKrupp, China's Baosteel and Italy's Ilva have agreed to Vale's
price hike plans.
Indian state-owned miner NMDC Ltd. has said it would raise prices
by 65% beginning April.
Coking coal prices are already touching the roof. On top of this,
the
quantum rise in iron ore prices is a big worrying signal for
steelmakers,
particularly those that do not have captive resources.
Steel Authority of India Ltd., Tata Steel Ltd., JSW Steel Ltd. and
Jindal Steel and Power Ltd. are certainly better placed than others as
they hold leases for iron ore mines.
But even these companies are not insulated to volatile input
prices, as all of them depend on imports of coking coal, the second
most important raw material for making steel.
Steelmakers do have an option of raising prices to save their
margins, but steel prices beyond a level may be discomforting for a
government that is preparing for elections next year.
High steel prices have a cascading impact on the country's
wholesale price index-based inflation rate.
The headline inflation rate for the week ended Feb 9 climbed to
4.35% from 4.07% a week ago, disturbingly close to breaching the
government's comfort zone of 4.5%.
Concerned over high steel prices, the government asked companies
to partially roll back their prices earlier this month. It may repeat
its demand, many fear.
"Steelmakers are caught in a double whammy, and it is not an
encouraging sign for investors," an official from a steel company
said.
Early this month, steel companies hiked product pries by
2,000-2,500 rupees a tn.
.
The week-on-week closing prices of key steel shares, in rupees, on
National Stock Exchange:
.
Company Closing Level Closing Level % Change
Feb 22 Feb 15
.
Steel Authority 238.65 220.80 8.1%
Tata Steel 804.70 818.15 -1.6%
JSW Steel 1,115.05 1,187.80 -6.1%
Jindal Steel & Power 2,293.50 2,327.45 -1.5%
.
Nifty 5110.75 5302.90 -3.6%
Sensex 17349.07 18115.25 -4.2%
K.Karthik Raja
www.kences1.blogspot.com
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