Indian steel stocks party as global steel demand surges
Steel has been an unlikely star in the last few months. Since the beginning of 2021, most steel stocks have multiplied 2-3 times and are still looking attractive. Between April and June, foreign portfolio investors were busy adding steel stocks to their portfolio. Behind this sudden appetite for steel stocks, lies an unprecedented surge in demand for steel.
The rally in steel stocks has not been so much about tariffs but about an incredible demand surge. Joe Biden plans to sink a trillion dollars into infrastructure; 5 million TPA of steel demand. EU is making a big shift towards clean energy and clean cars and that is seeing a surge in demand for steel. The recovery in global economies was quicker than anticipated. This led to a sharp spike in demand for steel, even as supply failed to keep pace; spiking prices.
Global supply in the steel export market got impacted by the actions of China and Russia. Both the countries decided to cut down on steel exports and first cater to their domestic demand. Japan and Korea may follow suit. This is likely to sharply reduce global steel supply. While India is the second largest producer of steel in the world, it ranks 13 in terms of steel exports due to huge domestic demand. This also opens up a huge export market for India.
When the post pandemic recovery started, the story of steel was about supply struggling to keep pace with demand. Today, the story is the ability of steel companies to pass on input cost hikes to end consumers. Robust demand, strained supply chains and pricing power is a heady combination and that is exactly what steel companies are enjoying today.
Start Investing Now!
Open Free Demat Account in 5 mins