Brokerage and research firm Edelweiss expects better prospects for the metals sector as steel prices in China start rising again on improving demand from the real estate and infrastructure sectors. Overall, the brokerage house maintains a positive outlook on the sector Tata Steel (target price: 1,950) and JSPL (Target Price: 575) as the leading stock in the metals space.
Despite weakness in regional markets, brokerages see signs of increasing demand in China as local governments continue to sell bonds, the proceeds of which will be used to boost the infrastructure and real estate sectors. As a result, the prices of Chinese domestic HRC and iron ore have risen together.
In the domestic context, the spread has remained resilient despite the fall in steel prices as a result of sharp fall in coking coal prices. Taking note of the emerging positive signs in China, Edelweiss has maintained its favorable stance on the sector with Tata Steel and JSPL as its preferred picks.
Also, as a result of better domestic realization, Chinese players are withdrawing export offers. The brokerage expects lower export volumes from China to maintain both regional price and market balance. That said, it will keep a close watch on further developments in this regard, the note added.
In view of weak demand and import threat, domestic HRC prices further declined last week at traders’ market. Edelweiss expects the recent weakness to have an impact on the notified prices of major steel companies in December 2021.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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