Metals, Mining Sector Check - Domestic Steel Prices Inched Up A Bit: Prabhudas Lilladher

Prabhudas Lilladher Report

Indian benchmark hot rolled coil prices (excluding-Mumbai) increased 0.5% week-on-week to Rs 55,300/tonne from Rs 55,050/tonne. Domestic spot spread declined to Rs 19,843/tonne from Rs 20,079/tonne week-on-week on rising coking coal prices.

European and Chinese HRC prices remained flat week-on-week at $630/tonne and $575/tonne respectively. Spot spreads for Europe and China narrowed to $143/tonne and $88/tonne respectively. Coking coal prices increased ~2% week-on-week to $329/tonne while iron ore fines prices (CNF Rizhao) remained flat week-on-week at $132/tonne.

On import parity basis, domestic discount declined to ~Rs 950/tonne week-on-week as prices started inching up. Indian steel imports hit seven-year high at 7 million tonne (+43% YoY) which should moderate in coming months as domestic premiums eroded.

Base metals prices declined 2-5% week-on-week. Aluminium prices remain subdued on higher global output (up 4% YoY to 6.1 million tonne in October).

As per SteelMint survey, Chinese HRC prices have potential for further uptick in the near term; on firm demand from end user industries and depleting stocks.

We believe domestic steel companies should start taking price hikes gradually to set-off the impact of rising input prices.

Top Picks: Hindalco Industries Ltd., Jindal Steel & Power Ltd. and Jindal Stainless Ltd.

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