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Steel stocks lose sheen

Calcutta, Jan. 2: The steel stocks failed to participate in the rollercoaster ride of the sensex in 2005. While the sensex rose by almost 44 per cent, major steel firms ' Tata Steel, Steel Authority of India Ltd (SAIL), Essar and Ispat ' either declined or remained flat during the year.

Among the integrated large steel mills, Tata Steel and Essar remained flat while SAIL and Ispat declined by 14 and 55 per cent respectively.

The share prices reflected the fall in steel rates that tumbled by Rs 10,000 a tonne or 33 per cent year-on-year.

After reaching a historic high of Rs 30,000 a tonne in the domestic market during the January-March period, prices went downhill to reach Rs 20,000 a tonne on an average.

“The fall is in line with the global trend. Indian market could have done better had there not been cheap imports from east European and CIS countries,” a steel industry executive said.

During the year, production went up by 8 per cent. Consumption growth was little better at 9.5 per cent in the same period.

However, availability grew by 11 per cent, depressing the market sentiment.

While there has been an almost 100 per cent increase in imports, some products are coming at $380-400 a tonne (Rs 17,000-18,000). “There is a tendency to benchmark the local price with the cheapest import and hence there is a pressure on the local market,” he added.

The industry is hoping for stability of prices in the near term. It would settle for Rs 20,000 a tonne for the January-March quarter. “As a consequence, there is unlikely to be any positive surprises in the earnings of these companies. There are plenty of other options where investors can put money into,” a stock market analyst said.

While the going was good in the early part of 2005, all steel companies worth their salt had announced major expansion plans.

National Steel Policy 2005 has predicted 100 million tonnes domestic steel production by 2020.

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