Frontline steel stocks touch fresh 52-weeks high
Frontline steel stocks touched fresh 52-weeks high on Tuesday on the back of strong international prices and buoyant export opportunities, overshadowing the fear of demand moderation in the domestic market in the wake of the renewed outbreak of Covid-19.
Scrips of Tata Steel, Steel Authority of India (SAIL), JSW Steel and Jindal Steel & Power (JSPL) rallied to their respective highs before cooling off at the end as investors re-rated the sector expecting a strong show in the coming quarters.
Producers have pushed benchmark hot rolled coil prices in April up as much as Rs 4,000-Rs 4,500 per tonne to Rs 57,600 per tonne, supported by international dynamics especially in China, the world’s largest producer.
Chinese steel output has come down month-on-month in February, the World Steel Association noted, and the production may remain muted in the rest of the year, supporting a high steel price.
Back in India, consumption in 2020-21 will be lower than the previous year even though the decline will not be as much as feared initially.
Rating agency Icra said the contraction in domestic consumption has been 9.9 per cent in the first 11 months of 2020-21 compared with a 19.6 per cent drop witnessed in the first eight months of 2020-21 on the back of a sharp pullback in demand during December 2020 and January 2021.
Icra also apprehended demand moderation because of localised lockdowns announced by the state governments. Domestic prices could remain high as the landed price of import would still be higher by 10 per cent.
High prices coupled with relatively benign prices of the raw material would translate into strong margins, allowing companies to deleverage the balance sheet.
S&P Global upgraded Tata Steel to “BB-” from “B+” taking into account strong cash flow in next two years.
“In our base case, we expect Tata Steel’s adjusted debt to decline about 30 per cent by March 2023 from the March 2020 level of about Rs 1.1 lakh crore, leading its credit metrics to steadily improve,” S&P Global noted.
The company also came out with production numbers whereas Tata Steel India achieved the highest ever annual delivery volume of 17.30 million tonnes in 2020-21, despite the Covid-19 pandemic induced disruption in the first half.
JSPL and SAIL, too, recorded highest ever sales in the last fiscal, partly aided by strong export.