NEW DELHI: After being in high demand for over a year, steel stocks are under tremendous pressure on account of falling exports, inflationary pressure and slowdown in the global economy. On Monday June 20, Tata Steel, SAIL, Jindal Steel & Power, SAIL, Hindalco , among few other steel companies hit 52-week low on the exchanges.
“India’s steel exports will drop 35-40% to 10-12 million tonnes (MT) this fiscal following the 15% export duty imposed on several finished steel products last month. Exports of iron ore and pellets will also fall this fiscal, and lower domestic prices,” Rating agency CRISIL said in a report.
Tata Steel closed Monday’s session 5% lower at `861.20. This is a sharp fall as it was trading near `1,370 on April 8. SAIL closed 5% lower at `64.90. It was trading near `110 apiece in early April. The BSE Metal Index has corrected about 60% in little over two months- from 23,500 level on April 11 to 15,000 level on June 20. Besides steel, copper and iron ore stocks have also tanked in the recent past.
Hindustan Copper fell 9% on Monday, while Vedanta tumbled over 12%. In a month, Vedanta has fallen over 24%. VK Vijayakumar, chief investment strategist at Geojit Financial Services, said duty hikes and falling exports will severely impact the profitability of the steel sector and this is getting reflected in the prices of steel stocks. The positive side is that steel consumers, notably in the automobile and construction sectors will gain from this steep decline in prices, he added.
Following the Russia-Ukraine war, demand for Indian Steel in the European market had shot up and it was during this time when investors were buying steel stocks in bulk. However, slowdown in the global economic activity, widespread lockdown in China and rate hikes by central banks worldwide to control inflationary pressure weighed down heavily on the demand for steel.