Steel stocks rise up to 2.7% as Nomura bullish on sector on China production cuts, strong domestic demand

Under the anti-involution policies of the Chinese government, various state-owned mills have been asked to cut the country's annual crude steel production by 5% or around 50 million tonnes from 1.0-1.05 billion tonnes since 2020. In Jan-Jul, the crude steel output fell 2% on year to 594.5 million tonnes. Nomura estimates around 9% cut in production in the remaining five months of 2025.

While demand remains tepid in China and exports still remain at record levels, aggressive production cuts should provide some support, said Nomura.

The brokerage said the decline has curtailed pressures, provided support to local producers.

Nomura added that robust consumption, restricted imports and improving price dynamics will likely boost India's steel industry.

Nomura expects an earnings before interest, tax, depreciation, and amortisation compounded annual growth rate of 25–27% over 2024-25 (Apr-Mar)-FY28 across companies under its coverage. It has maintained 'buy' recommendations on JSW Steel and Jindal Steel. The brokerage has raised its target price on JSW Steel by 7% to Rs 1,300 from Rs 1,220 and on Jindal Steel by 6% to Rs 1,150 from Rs 1,080, reflecting the sector's improving medium-term earnings visibility.

So far in 2025, the Nifty Metal index rose 16% while JSW Steel rose 25% in the same period and Jindal Steel rose 11%.

With inputs from Reuters