Expect domestic steel prices to correct in the near term; Optimist on Tata Steel: Edelweiss Institutional Equities
The street suffered a drop in steel prices in July because, on the one hand, Russia would impose an export duty from August and therefore Russian steelmakers could start flooding the market with a lot of ‘steel and could also lower prices to lower their inventories. On the other hand, there could be a correction in Chinese steel prices and therefore the steel price in India could correct accordingly.
In addition, there has been a correction in export prices for India and this could be reflected in lower steel prices. Domestically, too, India is entering seasonal week months, which could put additional pressure on steel prices. Secondary steelmakers are sitting on higher inventories.
Meanwhile, consumption in the domestic market is also expected to be postponed due to the second wave of COVID-19 and the anticipation of a third wave.
Shedding more light on the trajectory of steel prices, Amit Dixit of Edelweiss Institutional Equities said that looking at the correction in Indian export steel prices, it had been significant, close to of $ 70 / tonne, or about 7% week after week. . Thus, the current export steel prices for India stand at $ 920 / tonne, which is the lowest in the region.
The price correction is mainly due to the fact that Chinese steel prices have undergone a significant correction and could stabilize between $ 940 and $ 945 / tonne and that Russia is also expected to export steel in July, Dixit said. .
The main reason for the correction in steel prices in India is weak domestic demand. Most of the flat players were directing their sales to the export market, but now they are expected to compete with Russia and China, and as they have to increase sales volumes, prices have fallen. Moreover, domestic demand remains lukewarm, Dixit said. CNBC-TV18.
However, for the year as a whole, Dixit said prices would remain healthy at around Rs 59,000 per tonne for HRC despite short-term corrections.
The house is bullish on Tata Steel with a price target of Rs 1,300, mainly due to the turnaround in their business in Europe, Dixit said.
For the full interview, watch the video.
(Edited by : Aditi Gautam)
First publication: STI