Stock prices of companies in the metals sector (including steel) closed the session on a high note on Friday after Fitch Group firm India Ratings & Research revised its steel industry outlook to stable for FY19 from negative in FY18. India Ratings & Research revised its steel industry outlook to stable, owing to healthy domestic and global demand growth along with ongoing capacity rationalisation in China. An analyst at Edelweiss Securities said that the outlook for global steel industry is improving primarily on capacity cuts being implemented in China. Metal stocks on Friday gained up to 6.5% even as the S&P BSE Metal index ended the session 3.16% higher at 15,327.90 and the Nifty Metal index closed 3.19% up at 4,028.80. The benchmarks Sensex and Nifty, both, ended the day with gains of about 1%. Tata Steel led the rally, gaining 6.26% to close at Rs 677.80. Jindal Steel & Power, Hindustan Zinc, National Aluminium, Steel Authority of India (SAIL), JSW Steel, NMDC, Vedanta and Hindalco Industries were the other prominent gainers. Tata Steel has emerged the top bidder for Bhushan Steel and Bhushan Power & Steel. “We believe, potential acquisition of these stressed assets makes strategic sense for Tata Steel, despite the seemingly expensive valuation,” said Edelweiss Securities in a report.
India Ratings & Research believes that FY19 will be a year of consolidation for the steel industry. “However, some of the stressed assets may take 12-18 months to ramp-up utilisation to optimum levels. A turnaround in these stressed assets along with new capacities ramp-up could more or less meet the incremental demand, assuming import-export levels remain steady,” said Akash Krishnatry, analyst at India Ratings. Analysts believe China’s continuing capacity rationalisation efforts would help moderate the global oversupply situation. “This is likely to continue in 2018 with plateauing Chinese exports and limited import threats for India,” shared Rohit Sadaka, analyst at India Ratings in a report.
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