Steel demand highest post recession

Steel prices traded in a range this month with downward pressure on prices, as there is Chinese oversupply and demand prospects still weak for US and Euro zone till 2010.

JSW Steel Ltd, India's No. 3 producer, also expects prices of the alloy to remain stable in the Oct-Dec quarter and is not expected to revise rates this month. Minister of steel Virbhadra Singh also urged the industry to make steel available at affordable prices in order to boost consumption in the semi-urban and rural areas.

Local demand has improved for steel as indicated in the data released by Steel Ministry. India's steel consumption rose by 5.70% to 26.49 million tonnes in the first six months of the current fiscal as compared to same period last year on account of improved demand from sectors like automobile and consumer durables.

On the supply side, leading steel producers of India have reported significant growth in steel production in the last few months. With the fine balance between demand and supply conditions, steel prices are likely to stabilize around these levels.

The recovery phase in steel was again halted around Rs22200-22000/Mt mark in the month of October. The metal has treaded downwards after its failed attempt to crossover its major resistance at its 50 and 200 Day EMA. At present levels, the counter is finding support around Rs20900-21000/Mt zone as is depicted by the trend line in Daily chart.

The counter seems sideways at present levels, but can retreat from hereon only incase, this level holds it from falling further. Another factor which might support upside is the potential move of MACD in to positive territory in coming days which would reinforce the trend in favor of bulls.

On the contrary, break of the trend line support would trigger a round of sell-off after the consolidation phase and would be an indication to exit longs as that would entail lower levels of around Rs20000-19500/Mt in near term.

Courtesy: Religare Commodities

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