Steel stocks in focus; JSW Steel hits 52-week high, Tata Steel surges 5%

The recovery in steel demand has so far largely been led by flat steel products
Shares of steel companies were in demand on Friday, ralling by up to 6 per cent on the BSE on expectation of demand recovery.

JSW Steel advanced 6 per cent to Rs 308, hitting a fresh 52-week high on the BSE. The stock surpassed its previous high of Rs 298 touched on October 9, 2020. Tata Steel, Jindal Steel and Power and Steel Authority of India (SAIL), on the other hand, were up 3 per cent to 6 per cent on the BSE. At 02:33 pm, the S&P BSE Metal index, the top gainer among sectoral indices, was up 3 per cent as compared to 0.78 per cent rise in the S&P BSE Sensex.

Operational data released by domestic steel companies earlier this month suggested that domestic volume off-take has improved, particularly, for the flat steel segment. Domestic steel producers have ramped up production to optimum capacity utilization.

"India's steel consumption declined around 31 per cent year on year (YoY) in April-September period (1HFY21) to 35.4 million tonnes. However, domestic demand decline was much lower at 6 per cent YoY in September 2020," Motilal Oswal Financial Services (MOFSL) said in steel sector update.

The recovery in steel demand has so far largely been led by flat steel products (demand from auto, white goods etc). With an expected recovery in long steel demand post monsoon (as construction activity picks up), we expect domestic steel consumption to normalize in October-March (2HFY21), the brokerage firm said.

Meanwhile, steel trade data released by China suggests demand remains strong, with net steel exports declining to 10-year low in September 2020. Moreover, high passenger car sales in Sep'20 confirm strong end user demand for steel in China. China's domestic steel prices are also on the rise again post the National Holidays that ended last week.

MOFSL believes strong steel demand and prices in China, if it sustains, would be beneficial for steel prices in the region as well as India.

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