Tata Steel, JSW Steel, Jindal Steel: Price targets as coking coal prices rise 

Tata Steel, JSW Steel Ltd, SAIL,Jindal Steel: Shares of metal sector firms such as Tata Steel Ltd, JSW Steel Ltd, SAIL and Jindal Steel are in focus as two brokerages HSBC and Nomura have stated their stance on the steel sector stocks. Global brokerage HSBC has remained constructive on key domestic steel producers saying that integrated operational scaling provides pricing flexibility.

HSBC on steel 

HSBC has a buy rating on Tata Steel and JSW Steel. Coking coal prices have surged 26% in a month, in what is a seasonally weak period, the brokerage said adding that it expects domestic price hikes to offset cost hikes.  The brokerage said more hikes from here require regional price hikes

The brokerage gave a Hold stance on SAIL stating that coking coal costs affect SAIL most. SAIL's unhedged import dependency places its operating profitability at a distinct disadvantage, said HSBC.

However, it finds the impact of coking coal costs on Jindal Steel lower and has a Hold call on the metal firm.

The 26% month-on-month surge in global coking-coal prices is occurring during a seasonally weak period, meaning spot price corrections will lag.

Nomura on Steel

The brokerage maintains positive outlook on the Indian steel sector and believes domestic steel industry is well positioned to benefit in 1HFY27F from the price hikes implemented. The brokerage is of the view that price hikes are more than sufficient to absorb any cost inflation arising from the West  Asia crisis. The brokerage mantained a Buy call on Tata Steel with a target price of Rs 240. Its stance on JSW Steel is also a Buy with a target price of Rs 1400. The brokerage has a Buy call on Jindal Steel with a target price of Rs 1300.

Steelmakers brace for higher costs

A sharp rise in coking coal prices is emerging as a key challenge for Indian steelmakers, putting pressure on margins even as the sector maintains a relatively constructive outlook. Coking coal prices have climbed 26% in a month, creating a significant cost burden for producers.

However, HSBC remains positive on companies such as Tata Steel and JSW Steel, arguing that their strong positions in the domestic market and ability to command premiums in flat-steel products could help them pass on higher input costs to customers.

The brokerage expects pricing power to become increasingly important once the monsoon season ends. Steelmakers that are able to implement price increases effectively could protect profitability despite elevated raw material costs.

HSBC's view also highlights the growing importance of raw-material integration and financial strength in the steel sector. Companies with stronger balance sheets, greater access to domestic raw materials and visible capacity expansion plans are likely to be better positioned than producers with greater exposure to unhedged input costs.

Margin gap could widen across steel producers

The latest cost pressures could result in a divergence in margins between flat-steel-focused producers such as Tata Steel and JSW Steel and long-steel-heavy players such as SAIL.

While higher coking coal prices are likely to weigh on the sector in the near term, the ability of companies to pass on these costs through higher steel prices will be crucial. The pace and extent of domestic price increases after the monsoon season could determine whether steelmakers can sustain their recent earnings momentum.

For investors, the key factors to watch will be domestic steel pricing, raw material costs and the ability of individual companies to protect margins. Successful price execution, combined with strong balance sheets and capacity expansion visibility, could provide an advantage to leading steel stocks as the industry navigates higher input costs.