China's Tangshan lockdown to hit steel market hard: Fastmarket's Xuan Ling

As China's COVID cases continue to rise, several cities are seeing fresh lockdowns. The country's top steel-making city, Tangshan has now implemented a lockdown to contain the spread of the virus.

To discuss what this could mean for spiking steel and raw material prices, CNBC-TV18 spoke to Rakesh Arora, Founder of Goindiastocks.com and Xuan Liang, Analyst at Fastmarkets.

Liang said, “Recently, there are a lot of unusual factors that are impacting the steel markets globally and the most important one is the lockdown of the Tangshan city. As the analyst from Fastmarkets, we expect that the lockdown will be rather short lived than the previous one and the steel price - there are upside risks for the steel price from the short term. But actually, we do not expect the market will increase, will give a lot of upside correction for the steel market, because the demand side of this steel has also been dampened because of the lockdown nationwide.”

Explained: Why steel cos are considering force majeure to call for fresh contracts and last-mile impact

Arora said, “From an investor's point of view, we have to look at longer-term trends, rather than get caught up in all this noise, which is happening right now. There is momentum in commodity prices, and that is helping stocks go up. But from a valuation point of view, one has to look at what is the sustainable margin these companies can do and on that to where there's still some juice left or not. So some of the steel companies do appear still cheap, based on the long-term sustainable margin. Base metal companies are largely building in the best-case scenario already. So it will all depend on how long this war premium is, I would say, on the commodities last for the base metals to continue to outperform. I don't see too much of value there ferrous there's still some value left.”