Tata Steel To Hindalco To Benefit From Lowest Iron Ore Prices Since August
The drop in prices could be beneficial for companies like Tata Steel, JSW Steel, Steel Authority of India, Jindal Steel & Power, Hindalco Industries, and Kalyani Steels.
Iron ore futures may fall further below their nearly seven-month low hit on Monday due to surplus stockpiles and weak Chinese demand, benefiting Indian steel makers.
Iron ore futures expiring in May 2024 opened 4.27% lower, nearing almost $110 per tonne on Monday, signalling their lowest close since August 2023. It has fallen 11.66% in the past month.
What's Driving This Weak Demand
The downturn in prices reflects almost a quarter since its peak in early January. This comes against persistent pressure on China's real estate and manufacturing sectors. The significant drop in Chinese steel demand has been mainly due to subdued construction activity, given the government's ongoing crackdown on property debt.
Despite expectations for a post-Lunar New Year resurgence in construction, the anticipated upturn has failed to materialise.
Analyst Views
Iron ore prices may experience further declines in the near term, given that inventories at Chinese ports are surging to their highest levels in a year, according to analysts.
"Expects subdued prices," Rakesh Arora, founder of GoIndiaStocks.com, told NDTV Profit.
"Lower than anticipated steel demand post-Chinese New Year and high producer inventory have led to steel mills pushing out the buying of iron ore," he said. "At the same time, iron ore supply in Australia has been picking up as we come to an end of cyclone weather."
Benefit to Steel Manufacturers
Steel manufacturers could benefit from the recent drop in prices, as iron ore is a key raw material for steel manufacturing. The drop in prices could be beneficial for companies like Tata Steel Ltd., JSW Steel Ltd., Steel Authority of India Ltd., Jindal Steel & Power Ltd., Hindalco Industries Ltd., and Kalyani Steels Ltd.
Hindrance to Iron Ore Miners
Declining iron ore futures prices directly impact the revenue of iron ore mining companies, leading to reduced profitability. As a result, companies like NMDC Ltd. and Vedanta Ltd. could likely witness a decline given the drop in iron ore prices.