Tata Steel, JSW Steel shares climb as China eyes steel output cut

11 January 2017

Shares of select steelmakers such as Tata SteelBSE 3.62 % and JSW SteelBSE 5.67 % and lenders with significant exposure to steel industry such as ICICI BankBSE 1.75 %, Axis BankBSE 1.91 % and SBI advanced in trade on Wednesday after the Chinese government decided to shut all ditiao steel capacities by June 2017.

Shares of select steelmakers such as Tata SteelBSE 3.62 % and JSW SteelBSE 5.67 % and lenders with significant exposure to steel industry such as ICICI BankBSE 1.75 %, Axis BankBSE 1.91 % and SBI advanced in trade on Wednesday after the Chinese government decided to shut all ditiao steel capacities by June 2017.

“The medium frequency induction furnace capacities are believe to be around 100-120mtpa, nearly 9 per cent of national total steel capacity, with annual production around 50mt (nearly 6 per cent of China’s total annual production. The impact in steel prices and margins might not be that big in this winter low season, but it will generate great impact in the peak seasons post the Chinese new year,” said CLSA in a note.

The foreign brokerage noted that while half of the capacities are owned by EAF mills or steel processing companies, and the other half are standing-alones, which we expect to be closed in 2017.

The key provinces (Jiangsu, Tangshan, Shandong) have stopped the production of medium frequency induction furnaces in the past two months, which represents about 70 per cent of the national medium frequency induction furnace capacities, the brokerage noted.

Shares of Tata Steel soared 4.29 per cent to hit a high of Rs 449.40 on BSE. JSW Steel stock soared 7.15 per cent to hit a high of Rs 191. Lenders such as SBI, Axis Bank and ICICI Bank gained 1 per cent each.

 

Source:economictimes.indiatimes.com