Shares of steel companies are back on the radar of foreign institutional investors, who have progressively increased their stakes in companies such as Tata Steel and SAIL.

For the latest quarter ended December 2013, almost all major steel makers have reported an increase in FII holdings over the previous quarter. Perhaps, the trend could be triggered by the slight pick up in demand being witnessed by the steel companies in recent months.

Higher volumes

Steel companies have reported improved volumes and have increased prices marginally — by 2 to 4 per cent over the past four months. The price hike is likely to be sustained over the next two quarters, an analyst said.

For the December quarter, Tata Steel and SAIL have reported sales growth of 9 and 6 per cent, respectively. Tata Steel’s December quarter sales stood at 2.07 million tonnes (mt) as against 1.87 mt in the corresponding quarter last year. SAIL had reported sales of 2.98 mt for the quarter.

Betting on Q3

Analysts expect the steel firms to report better numbers for the December quarter mainly on higher volume growth.

JSW Steel Ltd reported a consolidated net profit of ₹466 crore for the December quarter against a loss of ₹74 crore in the year-ago period, thanks to better realisation and higher production.

Tata Steel is expected to disclose its numbers for the quarter on February 11.

“Though the domestic demand still remains weak, the sales volumes are largely driven by exports and import substitution,” an analyst with a domestic brokerage, who did not want to be indentified, said.

According to the Joint Plant Committee in the Ministry of Steel, the domestic consumption grew at a mere 0.5 per cent to 53.78 mt during the April-December period of the current financial year against 53.51 mt in the corresponding period last year.

Export momentum

Total steel exports during April-December were up 9.5 per cent at 4.13 mt against 3.77 mt in the corresponding period last year. Exports of non-alloy or carbon steel were up 15.5 per cent at 3.82 mt as against 3.30 mt in corresponding period last year.

However, the shipments of alloy steel were lower by a third at 0.31 mt against 0.46 mt in the corresponding period last year. During the April-December period, total steel imports into the country were down 29.2 per cent at 4.09 mt against 5.79 mt in the corresponding period previous year.

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