Nomura expects better profit margins for top Indian steelmakers as domestic price hikes offset rising costs. While the outlook is positive, the brokerage warns that ongoing weakness in China’s property sector could keep global construction steel demand subdued.
Global financial firm Nomura has expressed an optimistic outlook for the Indian steel sector, specifically highlighting improved profitability prospects for companies like Tata Steel, JSW Steel, Jindal Steel & Power, and Lloyds Metals and Energy. This positive view is driven by the recent recovery in domestic rebar prices and lower input costs for raw materials.
Price Trends and Margin Support
Domestic steel prices showed signs of improvement as of July 31, 2026. Rebar prices rose by Rs 2,150 per tonne on a weekly basis to reach Rs 50,450 per tonne, which ended a three-month period of falling prices. Although hot-rolled coil (HRC) prices saw a slight dip of Rs 100 per tonne to settle at Rs 57,700 per tonne, Nomura suggests that price increases initiated between late FY26 and the first quarter of FY27 are sufficient to absorb cost pressures linked to geopolitical tensions in West Asia.
The industry is also benefiting from favorable input costs. Imported coking coal prices dropped by $3 per tonne to $221 per tonne, while iron ore prices fell by $3 per tonne to approximately $90 per tonne. These lower input costs, combined with a robust flat-long steel spread of over Rs 7,250 per tonne, have helped sustain HRC spot margins, which were estimated at nearly Rs 34,720 per tonne in July.
Global Risks and Sector Challenges
A primary risk highlighted for the sector remains the persistent slowdown in China’s property market. Recent data shows that contract sales by the top 100 Chinese developers fell by 18.3% year-on-year in July, representing a decline from the 9.6% drop recorded in June. Because China is a major consumer of global steel, this weakness in the property construction segment continues to pressure overall demand.
Regarding international trade, the brokerage analyzed the potential impact of US Section 232 tariffs, which apply duties of 25% or 50% on various metal and auto-related products. However, Nomura assessed that because India’s direct steel exports to the United States represent a relatively small share of total output, the impact on domestic manufacturers is expected to remain limited.
Moving forward, investors may track whether domestic price hikes can be sustained in the face of ongoing global demand concerns. The performance of these steel companies will depend on their ability to manage production costs and navigate the impact of slowing international construction demand, particularly from China.