Key insights
- Morgan Stanley reports Indian steel prices have weakened recently but expects support due to restocking and government safeguard duties. Steel stocks have outperformed the Sensex YTD. Rising iron ore and coking coal prices in China and Australia, respectively, could put pressure on margins for US steel producers, indirectly impacting US steel stocks negatively.
Investing.com - Steel prices in India have weakened in recent weeks, with hot-rolled coil trading at Rs57,500 per ton, down 4% since the end of March, according to Morgan Stanley. Rebar prices fell 7% during the same period to Rs48,400 per ton.
Domestic HRC prices are currently trading at an 8% discount to import parity prices, including safeguard duty, compared to a 7% discount last week.
China CFR iron ore prices for 61% Fe content rose 3% week-over-week to $112 per ton. Following NMDC price increases this week, domestic prices are trading at a 55% discount versus parity, close to the five-year average of 56%.
Australian hard coking coal prices increased approximately 4% during the week to around $240 per ton, up 3% month-over-month.
Domestic spreads decreased around 3% during the week but remain up approximately 27% since mid-December lows and are near the April 2025 peak.
Morgan Stanley noted an increase in imports during April, which has driven inventory restocking as reflected in Joint Plant Committee numbers. The bank expects the restocking cycle to continue as the monsoon season approaches and production increases following recent capacity additions.
The Indian government's imposition of a safeguard duty has provided support for domestic steel prices, contributing to spread expansion.
Steel stocks have gained approximately 17% year-to-date, while the Sensex has declined around 9%. Morgan Stanley expects steel stocks to benefit in the near term, citing domestic prices trading at a discount to import parity.