Given the volatility in coking coal prices, brokerage house Edelweiss sees JSPL and Tata Steel as a better position as they are relatively different from coking coal prices. Besides, Tata Steel and JSW Steel will also benefit the most from higher automotive contract prices.
Edelweiss maintains its positive outlook on the ferrous space with a buy rating on Jindal Steel & Power or JSPL. 637) and Tata Steel (Target Price) 1,695) as the key stock picking,
“Despite sharp correction in domestic spot raw material spreads, we remain positive on the ferrous space: flat steel prices likely to be supported by recent rally in coking coal prices; negotiations on higher prices globally on automotive contracts , and has gained momentum. Secondary rebar prices are positive, indicating stable demand from the construction sector,” the note said.
In China, despite expectations of stimulus, the Covid-related lockdown is taking a toll on sentiments. The brokerage remains positive on the ferrous space with Tata Steel and JSPL opting for its leading metal stocks given their relative insulation from the cost of coking coal.
“Taking cues from the export market, HRC prices at traders’ market declined for the second consecutive week. The rebar market performed relatively better during the week with secondary rebar prices rising. On the other hand, coking coal prices resumed their upward trend, reducing the spread. FOB prices in the regional market remained in a narrow range,” the note from Edelweiss said.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.