Indian steel producers benefitted from the Rupee depreciation, while the US and European steel prices outperformed rest of world (RoW) in H2CY13 on the back of strong demand and supply disruptions.
''However, the currency weakness in countries like Russia, Ukraine and Turkey have resulted in the European/US prices softening by US$30-35/t during February 2014. In addition, the unsustainable spreads over Chinese prices and improved supplies is likely to result in further downside risk of USD25-30/t in the European and US Steel prices,'' said Prabhudas Lilladher.
''While, Rupee depreciation benefitted the Indian producers with improved margins, strong exports and reduced imports, the same has been relatively negated by currency depreciation across prominent steel exporting nations especially in the CIS,'' it said.
''We maintain our negative outlook on Indian steel stocks, given the weak outlook on global steel demand, overleveraged balance sheets and structural degradation of RoEs. JSW Steel's competitiveness would be impacted severely, especially in exports (30% of total volumes). Tata's European operations would be directly impacted by depreciation in currency of CIS and Turkey. We continue to like JSPL, driven by higher share of long products, better balance sheet and front-loaded capex,'' the stock broker added.
Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.