Steel stocks up 2-4% on govt push, demand seen only post monsoon

Steel stocks are shinning bright rejoicing at government's protection measures safeguarding the industry. Shares of Tata Steel, JSW Steel, JSPL and SAIL rallied 2-4 percent intraday on Friday. The government has extended minimum import price (MIP) on 66 steel products for two months after recommending anti-dumping duties on hot-rolled coils (HRC) and cold-rolled coils (CRC) earlier this week.

Aruna Sharma, Steel Secretary says in an interview to CNBC-TV18 that anti-dumping duty is a more lasting protection and the government intends to levy the same even on the 66 products that have got MIP extension.

Analysts see these measures to be positive for the industry. Credit Suisse expects supply to rise 10 percent, mainly driven by the four major listed names and Essar Steel. Assuming a 2.5 metric tonnes drop in net imports, it sees only a small net surplus, which is 1 percent of demand. It argues that even a USD 40 per tonnes rise in global steel prices could make exports viable.  “Given the large difference between local and import parity prices, domestic demand-supply becomes critical. While domestic steel demand has been tepid so far (up just 1 percent YoY in the last three months), we expect it to rise back to over 5 percent levels once the monsoon retreats,” it says in a report.

The brokerage firm is maintains overweight rating on Tata Steel (target: Rs 440), JSW Steel (target: Rs 2000), JSPL (target: Rs 85) but is underweight on SAIL (target: Rs 35).