Price hike essential for steel firms to preserve margins: Edelweiss Securities

Steel stocks are in focus on the back of reports of rebar and hot-rolled coil price hikes by sector heavyweights. CNBC-TV18 has learnt that the price hike has been roughly about Rs 1,500 per tonne. They have been undertaken by JSW Steel, JSPL as well as SAIL.

The reason for the price hike has been the sharp increase in coking coal prices, which is a key input into the manufacturing of steel. Coking coal prices have more than doubled, a month back coking coal prices were at $300 per tonne, right now they are at $650 per tonne.

Speaking to CNBC-TV18, Amit Dixit, director-institutional equities at Edelweiss Securities, said, “This price increase, I would say, is a necessity as of now. The coking coal price is up almost 2X that is around $350-odd compared to the past three months. The price hike that you are seeing is just the tip of the iceberg because this kind of price hike has actually rendered spreads very susceptible. The coking coal is at $300 since September, actually so, on the whole, this price hike was not only necessary but also extremely essential for steel companies to preserve their margins.”

He added, “So far, we have not seen demand destruction. But if this current level of prices stays, we might see projects getting postponed. However, we will have to see how things pan out.”