JSW Steel To SAIL: Steel stocks’ stellar run ended on diversion of oxygen to hospitals during the second wave of the pandemic and the onset of monsoon, a weak period of demand.
SW Steel To SAIL, Steel Stocks’ Stellar Run Disrupted By Supply Issues, Weak Demand
Commentary from China is also weighing on the sentiment. The world’s biggest consumer of commodities is releasing metals from state stockpiles to curb prices after factory inflation in May rose to its highest in 13 years.
Global commodity prices were largely steady in June after surging on rising demand after the first wave of the pandemic. Indian steel stocks soared 111-260% from September to May.
But shares of JSW Steel Ltd., Steel Authority of India Ltd. and Jindal Steel & Power Ltd. fell 9-17% in the last two months amid local demand concerns. Tata Steel Ltd. rose nearly 5% during the period.
Weak demand from housing segment due to lack of labour mainly has impacted demand, VR Sharma, managing director at JSPL, said over the phone. He expects the demand to recover fully by August due to growing speed of vaccination and lower interest rates on home loan segment.
Still, monsoon months of June till September is a weak period as demand from construction sector wanes.
Here are the key factors that have capped the steelmakers’ rally:
Crude steel production suffered in April-May over the previous months as oxygen was diverted to hospitals during the deadlier second wave of the Covid-19 pandemic. Numbers are not comparable with a year earlier as India was under a complete lockdown.