12-05-2025
Steel Stocks: Uptick in domestic demand, dip in Chinese exports & dip in coal prices: will these push steel stocks up?
Revival in March 2025 quarter
Safeguard duty
Live Events
Long-term catalysts
Challenges
Tata Steel
The company's Indian operations constitute 75% of its consolidated sales. Such significant exposure to the domestic market will safeguard its business from the impact of US tariffs.
Expected to report 6.4% quarter-on-quarter growth in EBITDA in the March 2025 quarter, according to consensus estimates of analysts compiled by Reuters-Refinitiv.
The performance will be aided by coking coal cost benefits and marginally better realisations.
The recent announcement of the transformation programme at Tata Steel Nederland (subsidiary) is expected to improve competitiveness in its Europe operations.
The transformation programme will focus on cash flows by maximising production efficiencies, optimising product mix and controlling fixed costs.
Motilal Oswal has a neutral rating on the stock and believes that the long-term outlook of the company remains healthy supported by its Indian and Europe businesses.
Jindal Steel & Power
It reported consolidated sales and EBITDA growth of 12.1% and 6% on a sequential basis in the March 2025 quarter.
Improved volumes, higher capacity utilisation and inventory liquidation aided by strong domestic demand and lower coking coal costs supported the performance.
The company reduced its net debt significantly by 11.8% quarter-on-quarter in the March quarter, supported by a reduction in working capital.
The company's expansion at Angul (Odisha) will support volume growth in the future. The expansion is expected to be completed by the end of 2025-26.
An Antique Stock Broking report says that cost savings from increased captive coal, slurry pipeline, and higher captive power would aid profitability in the future. It also lists a strong balance sheet and product mix improvement from capacity expansion as the key positives.
JSW Steel
It is expected to report a 15.9% quarter-on-quarter jump in consolidated EBITDA in the March 2025 quarter, according to consensus estimates of analysts compiled by Reuters-Refinitiv.
The performance will be aided by project ramp-up, lower coking coal cost, and a marginal improvement in realisation.
The management's focus on capacity expansion, cost optimisation, investments in renewable energy and logistics and increasing the share of value-added products will support growth.
The recent Supreme Court's rejection of JSW Steel's insolvency resolution plan for Bhushan Power & Steel (BPSL) due to procedural lapses has created near-term uncertainty.
Though analysts expect the company to file a review petition against the judgment, the near-term stock price movement is likely to remain volatile.
Steel companies have battled headwinds in recent quarters amid global slowdown fears, rising Chinese imports, weak international demand, and oversupply. Between May 2024 and January 2025, Hot Rolled Coil (HRC) prices in India fell over 13%, according to Reuters-Refinitiv price contraction has affected the profitability of domestic steel companies. The EBITDA (Earnings before interest, tax, depreciation and amortisation) per tonne of domestic steel companies fell below the decadal average of Rs.10,000 per tonne, according to a recent note from CRISIL and pricing pressures are evident in the Nifty Metal Index, which delivered -7.2% returns over the past year, trailing the Nifty 50's 8.6% gain. The analysis is based on closing values from 6 May 2024 to 6 May expect steel companies to post improved quarter-on-quarter performance, driven by lower raw material costs. Spot coking coal prices averaged $186 per tonne in the March 2025 quarter—down 8.5% sequentially and 39.9% year-on-year, according to Antique Stock Broking. Lower input costs and a seasonal boost in construction demand are likely to support strong domestic government has recently imposed a 12% safeguard duty (following the proposal from the Directorate General of Trade Remedies) on select categories of flat steel imports for 200 days. The duty is expected to provide respite to the domestic primary steelmakers by reducing low-cost domestic steel prices have recovered sharply from January 2025 lows and gained over 13% (up to 2 May 2025). Analysts expect the duty to provide critical support to the domestic steel prices in the near term. 'With the duty intervention and relatively favourable input costs, the EBITDA per tonne of the domestic primary-steel makers is expected to recover by Rs.1,000-1,300 per tonne in 2025-26,' adds the CRISIL domestic demand for steel is growing at a healthy pace, aided by the infrastructure World Steel Association, in its short-range outlook (released in October last year) anticipates an 8% increase in steel demand in India for 2025. To cater to the increased domestic demand, the steel companies are expanding capacities and increasing value-added a softening of exports from China is expected to provide relief to the domestic steel companies. A recent HDFC Securities report expects Chinese steel exports to ease, as government stimulus and a stabilising real estate market boost domestic demand—providing further support to global steel there are positives, the ongoing global uncertainties could amplify challenges for the sector.'Concerns around oversupply in both the domestic and global markets, the slowing global GDP amid tariff uncertainty, and the possible devaluation of the yuan could put pressure on the steel industry,' says an Elara Capital CRISIL note says that even with the safeguard duty in place, a longer protectionist intervention may be required if a prolonged global trade war creates a significant imbalance in demand and prefer steel companies that are focused on the domestic market and have higher raw material integration. Tata Steel, Jindal Steel and Power, and JSW Steel are mostly preferred.
