Global brokerage house Nomura has turned positive on select steel sector stocks. According to the brokerage report, the recent coal mine accident in China and the regulatory crackdown that followed could lead to tighter coking coal supply in global markets.
As per the report, this may eventually impact steel companies across countries, especially those dependent on imported raw materials.
In its latest report, the brokerage house Nomura continues to prefer select Indian steel companies and has maintained its ‘Buy’ rating on Tata Steel, JSW Steel, Jindal Steel, and Lloyds Metals.
According to the brokerage report, “We maintain our Buy recommendation on Tata Steel, JSW Steel, Jindal Steel and Lloyds Metals.”
The brokerage believes these companies remain relatively better placed within the sector despite possible pressure on input costs in the near term.
Let’s take a look at stocks the brokerage is bullish on and the rationale behind it –
Nomura’s preferred metal stock picks
| Stock | Rating | Target Price | Approx. Upside Potential |
| Tata Steel | Buy | Rs 240 | ~14% |
| JSW Steel | Buy | Rs 1,400 | ~8% |
| Jindal Steel and Power | Buy | Rs 1,350 | ~10% |
| Lloyds Metals | Buy | Rs 2,050 | ~11% |
Why China’s coal disruption matters for steel stocks
The latest trigger for global metal markets came after a deadly coal mine accident in Shanxi province in China on May 24.
According to the Nomura report, the real concern is not the direct production loss from the accident itself, but the large-scale mine inspections and shutdowns that followed across the region.
Nomura stated, “The significance lies in the regulatory response, not the direct production loss.”
China remains one of the world’s largest steel producers, and Shanxi province contributes significantly to its coking coal production. Coking coal is a key raw material used in steel manufacturing.
According to the brokerage report, “Current reported disruptions imply ~319kt/day of impacted output.”
The brokerage believes prolonged inspections could tighten coal availability and eventually push global coking coal prices higher.
Why coking coal prices are now in focus
According to Nomura, China may initially attempt to replace disrupted domestic supply through imports from Mongolia and Russia.
However, the brokerage highlighted that logistical bottlenecks and quality differences may limit the effectiveness of those alternatives.
The report stated, “If inspections persist for two–four weeks, China may need seaborne replacement tonnes, with Australia the most likely marginal supplier.”
That is important because any sharp rise in demand for Australian premium coking coal could quickly increase global benchmark prices.
Nomura further added, “Even ~2–3mt/month of incremental Chinese demand could push coking coal prices materially higher.”
Which Indian steel companies may face pressure?
Nomura report added that the Indian integrated steel manufacturers may face near-term margin pressure if imported coking coal becomes more expensive.
Nomura stated, “Every US$10/t increase in coking coal can create ~US$7–9/t EBITDA impact for integrated steelmakers.”
The brokerage specifically highlighted that Tata Steel India and JSW Steel could remain more exposed because of their dependence on imported coking coal procurement.
At the same time, the report noted that domestic steel spreads are already showing signs of softening, which may add further pressure on profitability if raw material costs continue rising.
Why Nomura still remains positive on select stocks
Nomura continues to remain constructive on select companies because of their operational scale, business positioning and long-term demand outlook.
The brokerage believes companies with stronger execution, diversified operations and stable domestic demand exposure may continue to perform relatively better compared to peers.
At the same time, investors are likely to closely monitor developments in China, movement in coking coal prices and domestic steel demand trends over the coming weeks.
According to the brokerage report, “The immediate market reaction reflects this risk, with Chinese coking coal futures moving up (~8%), suggesting the market is pricing in a broader tightening in domestic steelmaking raw material availability rather than an isolated operational event.”
Disclaimer: Investment decisions should not be based solely on brokerage ratings, targets, or market commentary. The financial analysis and ‘Buy’ recommendations mentioned above represent the independent views of Nomura and do not constitute personal financial advice or an offer or solicitation to trade in any securities. Investors are strongly advised to consult a SEBI-registered financial advisor before making any investment decisions to fully assess market risks and suitability based on their individual risk appetite.
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