What does the National Steel Policy (NSP) mean for steel companies? Angel Broking

Views of Mr. Mayuresh Joshi (Fund Manager, Angel Broking):

"The Indian steel industries capacity stands at 120mt by the end of FY17. The steel ministry has set an ambitious target of 300mn tns by 2030. Though this shall entail investments of $150bn over the time horizon, key elements like global demand supply shall play a pivotal role in determination of the steel prices. China capacity which stands at 800mn tns is the driver in terms of trends for pricing of steel and India has moved in the top 3 global producers of crude steel. Albeit, movement of coking coal prices and iron ore which are important elements of the input costs for steel production are equally important and the spike we had witnessed in coking costs in the past few months have cooled down. The increase in coking coal costs had led to steel prices moving up as the pass through was essential in companies protecting their margins across the end product categories that they ultimately sold. With the imposition of various duties ranging from anti dumping/MIP/Safeguard duties the domestic steel industry enjoyed the benefits of lesser imports and stable domestic demand. With demand catching up and recovery seen across the value chain, steel majors who are also offering value added products and optimising costs to ensure the margins and the ROCE are protected can wade through the recovery we are seeking. Though the steel business is commoditised and prone to cyclicality in terms of pricing, demand/supply dynamics supportive government policies and a stable macro environment (as the central government is creating a stable business environment and industry friendly policies) shall ensure that the domestic steel industry can grown at a reasonable pace in the next few years."

Source : Equity Bulls

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