Steel shares rally on rumours of price increase

Steel shares rally on rumours of price increase
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First Published: Fri, Apr 06 2007. 12 24 AM IST
Updated: Fri, Apr 06 2007. 12 24 AM IST
Shares of steel companies, led by Tata Steel, shone on the bourses on 5 April 2007 on unconfirmed reports that steel prices are being hiked.
Talk of steel prices going up has been doing the rounds for about a fortnight now as the cost of inputs has risen, as has the global price of the metal.
Tata Steel was the biggest gainer in percentage terms among the 30 shares that comprise the benchmark Bombay Stock Exchange’s sensitive index. The stock was up 6.16% at Rs465.20, with 12.3 lakh shares changing hands.
Among other steel stocks, Kalyani Steels rose by 5.69% to close at Rs350.05, JSW Steel gained 4.91% to end at Rs497.10, Ispat Industries was up 4.41% at Rs13.73 and the public sector Steel Authority of India Ltd (SAIL) had gained 2.23% to close at Rs114.65.
A Mumbai-based analyst tracking steel stocks, who did not wish to be identified, said that it was the rumours of a possible hike in prices that drove the rally in steel stocks.
Unlike cement manufacturers, who chose not to reduce the prices of cement despite pressure from the government to do so, steel manufacturers had dropped prices on the Centre’s bidding in March. The market now expects the rollback to be reversed.
“SAIL holds the key. If it gives in to the government’s demand and not hike the price, other firms may go slow on their plan (of hiking prices),” said another steel analyst who also did not wish to be named.
The public sector company has around 40% market share and if it does not hike prices, it will have a dampening effect on the pricing decisions of other steel makers.
“We have to wait and see what Sail does,” admitted an official of a Mumbai-based steel company on condition of anonymity. “If SAIL does not hike prices, domestic steel firms will increase their export prices and start selling more outside,” added the official.
Mumbai-based steel makers Essar Steel and Ispat Industries said they have not increased their prices. Tata Steel, India’s largest private sector steel maker, too has not increased the prices.
Uttam Galva Steels may raise prices by more than 20%, the firm’s finance director Ankit Miglani had said in a 14 March interview to a news wire. “The company is reviewing the prices,” he said on Thursday.
The price of hot rolled coil, a benchmark grade, may be raised by Rs1,500 or 3.7% to about Rs28,500 a tonne, said Giriraj Daga, an analyst at Khandwala Securities Ltd in Mumbai.
“The government can’t really ask companies to keep prices suppressed for long,” Daga said. “The companies are probably waiting for inflation to stabilize before they decide on the extent of price hike.”
The wholesale price-based inflation dropped marginally to 6.39% for the week ended 24 March from 6.46% in the previous week, but higher than the Reserve Bank of India’s projection of between 5% and 5.5% in 2006-07.
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First Published: Fri, Apr 06 2007. 12 24 AM IST
More Topics: Money Matters | Equities |