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Industry players differ in their views on possible recovery with Severstal, Russia's second largest steel producer indicating that prices may have bottomed out and there could be a slow recovery while ArcelorMittal, w..

15 Nov 2013

BRUSSELS/MUMBAI (Commodity Online): With excess crude steel production, over capacity and weak demand, steel industry continues to be in the doldrums but opinions differ on how soon the market may witness recovery. Performance of Tata Steel, India's largest steel maker gives some room for optimism in the near term.

According to World Steel Association (worldsteel), crude steel production in September rose 6.1% on a year-on-year basis at 133 mn tons although production in the first nine months rose by 2.7% compared on an annualised basis.China’s crude steel production for September 2013 was 65.4 Mt, up by 11.0% compared to September 2012. Elsewhere in Asia, Japan produced 9.3Mt of crude steel in September 2013, an increase of 5.5% over September 2012. South Korea’s crude steel production was 5.2 Mt in September 2013, down by -8.7% on September 2012.

Industry players differ in their views on possible recovery with Severstal, Russia's second largest steel producer indicating that prices may have bottomed out and there could be a slow recovery while ArcelorMittal, world's largest steel producer feels the low point in steel has already been achieved.

India's stock markets were surprised at the performance of Tata Steel, India's largest steel maker, which reported a consolidated net profit of Rs 916.8 cr for Q2 FY 2014 against a loss of Rs 363.9 cr in the same quarter last year.

Tata Steel sold 6.48 million tonnes of saleable steel in the second quarter, from 6.07 million tonnes from last year, on a consolidated basis.It may be recalled that Tata Steel has been struggling in Europe due to difficult market conditions after the acquisition of Corus in 2007.

Brokerage firms like JPMorgan and Deutsche Bank maintained their 'overweight' and 'buy' ratings on the stocks and see it heading over Rs 500 in the next 12 months, which translates into an upside of over 46 per cent from Wednesday's closing price of Rs 358.85. JPMorgan raised its target price from Rs 500 earlier to Rs 525 for the next 12-months. Deutsche Bank expects the stock to rally towards Rs 525, raising its target price from Rs 372 earlier, Economic Times reported.

The steel industry majors have called for co-ordinated capacity cuts but it is not easy to implement in Europe where political pressures to sustain jobs overrides economic concerns for industry.

Meanwhile. Shanghai steel futures have made the biggest weekly loss since May on Friday on weak deamnd by top consumer China. The most traded rebar contract for May 2014 delivery fell to 3,622 Yuan ($595 per ton) and has lost 1.5% this week.


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