The way the second-rung steel stocks are performing on the bourses, it would suggest a major turnaround in the sector. However it may be early days yet. Although some categories of steel are witnessing good demand along with rise in prices, the prices of steel scrap are not showing any signs of reversal in trend. There are reasons to expect scrap prices to remain within bounds, at least for the time being. For a revival in the sector, it is necessary that the two move in tandem.With the cement sector showing indications of a revival, the market seems to be betting on the steel sector. The logic is that as cement despatches are rising (thanks to a pick up in the construction industry) it is just a matter of time for the steel sector to turn the corner. For every kilogram of cement consumption, there is a minimum 300 grammes of steel consumption. Also, with auto sales picking up, it is expected that most steel plants may not operate below their optimum capacities.
Major steel producers have hiked the prices of domestic hot rolled coils in the first-quarter of fiscal 1999-2000, but it has been mainly triggered by a sharp rise in international hot rolled coil(HRC) prices. The main reason for the hardening of global prices is the cut in production levels undertaken by many producers. The revival of the south-east Asian economies, too, have contributed to the rise in steel prices.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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