Shares of leading steelmakers such as JSW Steel and Tata Steel were subdued despite reporting an increase in crude steel output in January-March as well as for the full year 2012-13.
Shares of leading steelmakers such as JSW Steel and Tata Steel were subdued despite reporting an increase in crude steel output in January-March as well as for the full year 2012-13. This could be an indication of investor skepticism about the steel sector.
Shares of JSW Steel were flat at Rs 660.80, and Tata Steel shares down 1.2% at Rs 300.75 on the BSE.
JSW Steel reported 2 percent jump in crude steel output for the March quarter at 2.11 million tonne, while Tata Steel's crude steel production rose 26 percent on year 1.83 million tonne.
For the full year JSW Steel's crude production rose 15 percent to 8.52 million tonne despite low supplies of key raw material iron ore. Tata Steel's crude output for FY13 rose 14 percent to 8.13 million tonne. While JSW Steel will announce its steel sale number along with Q4 earnings, Tata Steel reported 29 percent increase in steel sales in January-March at 2.28 million tonne and 13 percent jump for FY13 at 7.48 million tonne.
Analysts said that steel company's output numbers were in line with expectations and were already factored in by the market.
"While Q4 numbers were good, it would be difficult for steel companies to maintain such volumes going ahead as demand for steel is really subdued," Gautam Chakraborty, an analyst with Emkay Global Financial Services said.
He further stressed that investor remain wary of steel sector as fundamentals of the sector remains poor. Steel demand generally picks up in January-May period due to increased construction activity, however due to over all slowdown in economy and construction sector, steel demand has been very passive.
Also read: Steel consumption grows by 3.3% in FY13
Another major steel consuming sector-automobile is also reeling from low demand causing trouble for steel manufacturers.
Steel sector has been facing several challenges since past two years on account of low availability of key raw material iron ore. Steel makers like JSW Steel have been dependent on e-auctions for its ore requirement after Supreme Court banned iron ore mining in Karnataka in August 2011.
Bhavesh Chauhan of Angel Broking expects steel shares to remain under pressure going forward. He expects decline in Q4 profitability of steel companies.