Whalesbook
Sector-Wide Momentum
Shares of India's major steel producers are currently in high demand, with Tata Steel, JSW Steel, and Jindal Steel all reaching new intraday highs on Monday. This broad-based rally reflects growing investor optimism surrounding the industry's outlook. Steel Authority of India (SAIL) also posted gains, hitting a 52-week high.
Demand and Trade Dynamics
The Indian steel industry is experiencing robust consumption, which grew by nearly 7% in the first nine months of fiscal year 2025-26. Crude steel production has outpaced this, rising around 9.5% in the same period. This surge has propelled India back into a net exporter position, with exports climbing by approximately 33% to 4.8 million tonnes, while imports fell by about 37% to 4.65 million tonnes.
Fitch Ratings anticipates India's steel consumption to expand by 8%-9% annually over the next few years, driven by strong performance in the infrastructure, construction, and manufacturing sectors. The agency forecasts JSW Steel's standalone EBITDA margins to increase significantly, supported by volume growth, steady prices, and cost efficiencies. The government's recent expansion of tariff barriers is expected to aid domestic producers' pricing power and margins, though persistent oversupply remains a key risk.
Company-Specific Outlooks
Tata Steel's management indicated that the third quarter of fiscal year 2025-26 likely marked the bottom for domestic steel prices, with sequential improvements expected in the fourth quarter. They anticipate a ₹2,300 per tonne increase in Indian realizations by Q4 FY26, aided by rising spot prices since December 2025, though coking coal costs are projected to increase by $15 per tonne. SAIL's management noted that increased exports and safeguard duties have stabilized the domestic market since December, with Q4 expected to see an uptick in pricing. Coal prices are remaining range-bound, supporting margins.
Analyst Endorsements
Motilal Oswal Financial Services reported that Tata Steel posted a decent Q3FY26 performance, primarily driven by healthy volumes, though European operations faced headwinds. The brokerage raised its FY26E earnings estimates by over 2% for EBITDA and over 3% for PAT, reiterating a 'BUY' rating with a revised target price of ₹240. For SAIL, despite muted net sales realization, earnings were decent, aided by volumes. MOFSL expects further improvement in Q4, supported by steel price recovery. The firm upgraded SAIL to 'BUY' with a target price of ₹175, citing a strong improvement in steel prices and margins.