India's hot-rolled coil (HRC) prices have caught up with the cost of imported steel, reaching import parity levels and marking a significant milestone in the steel sector recovery. According to Morgan Stanley's India Steel Tracker report for September, domestic HRC prices have risen 10% since end-July to ₹63,750 per tonne, representing a 3% premium to import parity - the landed cost of imported steel including the safeguard duty. HSBC also confirms that retail HRC prices are up 10% in three months and broadly at parity with landed prices. This development is particularly significant as it suggests domestic steel producers are now pricing competitively with international alternatives, potentially reducing import pressure on the domestic market.
Steel spreads have reached their strongest levels in recent months, with the gap between steel prices and raw material costs expanding significantly. Spreads rose about 1% on the week to ₹39,000 per tonne, reaching around the April 2026 peak and about 43% above the mid-December lows. This represents a substantial improvement from earlier periods when spreads were under pressure. The strengthening spreads reflect improved pricing power for domestic steel producers and suggest that cost pass-through mechanisms are functioning effectively in the current market environment.
Coking coal costs continue to influence steel pricing dynamics, with Australian hard coking coal at US$276 per tonne, down 2% on the week but up 28% since end-July. Supply disruptions in China are keeping prices elevated, though HSBC expects restarts of mines in China's Shanxi province to cool prices. Steel majors have implemented price hikes of around ₹5,000 per tonne to mitigate rising costs, with the domestic steel industry well positioned to benefit from these price hikes in 1HFY27F. Global iron ore prices remained stable at around $91 per tonne. The combination of rising steel prices and stable raw material costs has created favorable conditions for steel producers.
Domestic steel demand remains robust with consumption rising 7% year-on-year to 70 million tonnes in April-August, outpacing the 3.7% increase in production to 67.4 million tonnes in the same period. India's finished steel production rose 0.3% year-on-year to 13.48 million tonnes in August, while consumption increased 3.9% to 14.32 million tonnes. India remained a net importer, with imports rising 8% year-on-year to 0.72 million tonnes. Ravi Sodah, executive vice president at Elara Capital, noted that with patchy monsoon due to El Nino, construction activity has fared better, supporting demand. Additionally, demand from automotive and pipe manufacturing sectors has been growing, further aiding steel prices.
Brokerages present mixed views on steel stocks despite the positive price momentum. Morgan Stanley remains optimistic, expecting steel stocks to continue outperforming over the next 12 months based on government support, balanced supply-demand dynamics, and China's anti-inflation campaign. The brokerage maintains Overweight ratings on Tata Steel, JSW Steel, and Jindal Steel and Underweight on SAIL. HSBC takes a more cautious stance, warning of near-term risks as muted regional price increases could pull trade prices lower over the next 2-3 months. Steel shares have gained 10% this year while the Sensex is down 14%, with current stock prices showing Tata Steel at ₹188.02, JSW Steel at ₹1,273.20, and SAIL at ₹184 as of September 24.
