Frontline steel stocks surged to a year’s high on Wednesday on the back of a record price of the alloy in the local market.
Scrips of Tata Steel, JSW Steel, Jindal Steel and Power and state-run SAIL hit their 52-week peak even as the benchmark indices closed marginally in the red.
For the three private sector firms, investors have not seen such levels in the last 24-30 months, underlining the demand for the scrips.
Observers say the performance reflects the strengthening of the alloy’s price in India. Steel firms have hiked prices in the recent months.
Benchmark hot rolled coil steel price was raised by Rs 2,500-2,700 per tonne on Tuesday by major players, taking the ex-factory rate to Rs 47,000 per tonne in Mumbai. Retail prices have now topped Rs 48,000 a tonne, a range never seen before. Steel prices have risen more than 35 per cent year-on-year.
Analysts feel prices may go up as December-March is the peak sale period. Moreover, domestic steel is available at a 5 per cent discount to the landed price of imported steel. High prices coupled with affordable coking coal from Australia would translate into more profits for large firms, despite a rise in ore prices.
India Ratings & Research in a note said spread for the steel companies improved despite the increase in iron ore prices due to a combination of higher domestic steel realisations and lower coking coal prices.