The primary steel-consuming sectors are likely to develop strongly in FY24, aided by an increase in government infrastructure spending and steadily increasing semiconductor supply.
Metal company shares were in the spotlight on Friday, rallying up to 5% at the bourses in early trade on solid underlying demand and good growth momentum.
The BSE Metal index reached a 52-week high of 6,844.80, up 2.7% in intraday trade. On January 18, 2023, the index reached a new high of 6,919.6. The index was the leading gainer among sectoral indexes at 10:26 a.m. The Nifty 50, on the other hand, was up 0.40 percent at 19,328.
In intraday trade, the BSE Metal index also reached a new 52-week high of 22,550.47. On April 11, 2022, it reached a record high of 23,743.
Tata Steel, Hindustan Copper, Steel Authority of India, Jindal Steel and Power (JSPL), and Hindalco Industries all increased by 3% to 5%. Tata Steel (up 5% at Rs 128.65) and JSPL (up 4% at Rs 713.70) both achieved 52-week highs in the intraday session today.
“Indian steel demand is expected to be robust and grow by 6.2 percent in FY24 supported by strong GDP growth forecast, private consumption, and Government expenditure. India’s capital goods sector is also expected to benefit from the momentum in infrastructure and investment in renewable energy. Automotive and consumer durables are expected to maintain healthy growth driven by sustained growth in private consumption,” Tata Steel said in its FY23 annual report.
Integrated Steel Players will continue to build capacity in the current fiscal year, with utilization remaining robust at 80%. The firm expects the reduction of export duties to boost its net export position.
According to Prabhudas Lilladher analyst, Indian steel industries are likely to add 22 million tonnes of capacity over the next two years, driving volume growth. “However, near-term global demand is muted, led by a weaker China and developed nations grappling with rising inflation and interest rates, both of which are peaking,” they wrote.
Because Chinese GDP growth is projected to be stimulative and consumption-driven, demand recovery will be sluggish, and steel prices may bottom out as the sector continues to lose money. With reduced output in H2-FY24, the brokerage company anticipates prices to support it, and Indian players will ultimately benefit from this.
Meanwhile, with improved supply conditions, coking coal prices are expected to moderate and drive Ebitda margin improvement for steel players.
“We believe JSW Steel, JSPL and Tata Steel are well placed to benefit from upcoming capacities. With GoI’s increasing shift towards using stainless over carbon steel, usage has increased in India benefiting Jindal Steel. Hindalco is the biggest beneficiary of gradual recovery in developed nations driving CAN sheet volumes. NMDC is improving its focus on volumes while National Aluminium & SAIL would be pure play on prices,” the brokerage firm said.
