The share prices of domestic steel producers have fallen 8–12% since the onset of the West Asia war, mirroring broader market weakness. Yet, the March quarter (Q4FY26) may tell a different story.
Higher domestic prices—aided by safeguard duties on imports—alongside robust demand and improved spreads are expected to support strong earnings for steelmakers.
Price power returns
Domestic steel prices have climbed sharply following the imposition of safeguard duty on imports in December. The war has further disrupted key trade routes, lifting freight costs and, along with rupee depreciation, increasing the pressure on imports.
The spot price of hot rolled coil (HRC) has risen about 22% over its Q3FY26 average to ₹57,700 per tonne, but still remains below the landed cost of imports from China, giving domestic producers an advantage, according to a Nomura Global Market Research report.
For Q4FY26, the average HRC price stood at ₹53,866 per tonne — a 14% sequential increase. Rebar (long products) prices rose even more sharply, up 21% sequentially to ₹57,196 per tonne. This bodes well for Jindal Steel Ltd, where long products account for over half of sales volumes.
On the cost front, iron ore prices were largely stable during the quarter. However, the price hike taken by NMDC in March is likely to hurt profitability in the June quarter.
Meanwhile, coking coal costs rose by $15–20 per tonne (around ₹1,400–1,900) in Q4FY26, partially offsetting gains from higher realizations.
Demand revival
Steelmakers are also expected to report robust offtake in the seasonally strong March quarter.
According to Joint Plant Committee data, domestic finished steel consumption grew 8.8% year-on-year in the first two months of Q4FY26, compared with a modest 3.9% growth in Q3FY26.
Imports fell about 40% during the period, while exports jumped 50%. That said, exports still account for a modest 4% of total output.
Higher spreads and operating leverage are expected to lift Ebitda per tonne by around ₹4,500 sequentially in Q4, according to JM Financial Institutional Securities.
Tata Steel Ltd could also benefit from firming European prices following the implementation of carbon border adjustment mechanism norms from 1 January. These rules require European steel consumers to purchase carbon certificates for imports, raising costs.
LNG risk
On the flip side, production could face pressure due to disruptions in liquified natural gas (LNG) supplies from West Asia.
ICICI Securities expects a 2–3% reduction in crude steel output, assuming a 30–40% drop in gas supplies.
“We view the impact of the ongoing LNG crisis on the Indian metals sector as moderate, considering that the majority of primary ferrous players are heavily dependent on coal, with only about 6% exposed to gas,” the brokerage said.
Among companies exposed to LNG is JSW Steel Ltd, which operates a 1.5 mtpa natural gas-based plant at Dolvi, Maharashtra.
Despite the recent drag, shares of steel companies are up in the range of 22-28% over the last one year, buoyed by the imposition of interim safeguard duty in April last year, except JSW Steel, which is up about 6%.
Blame the valuations. JSW trades at a pricey enterprise value-to-Ebitda of 10 times, based on FY27 Bloomberg consensus estimates, leading to underperformance, whereas other stocks are trading at 7-9 times. Investors will now closely track developments in the West Asia war and its implications for trade flows, input costs and demand.