Tata Steel, SAIL, JSPL, JSW Steel: Steel prices down; what's next for these metal stocks

Global steel prices have been on a downward trend since mid-May, affecting major markets including China, India, Europe, and the US. According to Kotak Institutional Equities, spot prices for hot-rolled coil (HRC) in China, the US, Germany, and India have dropped by 2 per cent, 3 per cent, 4 per cent, and 1 per cent respectively in June 2025. The decline is attributed to subdued demand from end-users.

Kotak Institutional Equities notes that squeezed steel margins are leading producers to curtail raw material purchases in an effort to cut costs. This strategy is causing a negative feedback loop throughout the value chain, further impacting the market.

The report highlights that domestic flat steel prices have decreased by 4 per cent compared to their peak in May 2025, though they still exceed import parity prices. Factors such as weak global demand and seasonal headwinds are expected to maintain this downward pressure on prices.

The report also indicates that premium hard coking coal prices have decreased by 5 per cent compared to the last quarter, while seaborne iron ore prices have fallen by 8-9 per cent. These raw material costs are likely to remain low due to weak demand, especially from China, and improved supplies from major exporters like Australia and Brazil.

Kotak foresees a sequential recovery in domestic steel margins in the first quarter of FY26, driven by price increases due to the Safeguard Duty (SGD) implemented in April 2025 alongside stable coal and iron ore costs. The brokerage advises investors to prefer non-integrated steel producers like JSPL and JSW Steel over integrated producers such as Tata Steel, SAIL, and NMDC.

Kotak maintains a 'SELL' recommendation for Tata Steel, SAIL, and NMDC, suggesting these integrated producers are less favourably positioned in the current market climate. The preference for non-integrated players reflects better risk-reward potential amid falling raw material costs.

The broader implications of these market shifts include potential impacts on company earnings and stock performance. Investors are urged to consider these factors when assessing their portfolios. The report also mentions that a continued drop in export markets and early monsoon could further affect the demand for steel in construction.

Despite current challenges, Kotak remains optimistic about a recovery in margins in the near term, supported by an anticipated stability in raw material costs and strategic price adjustments. Investors are encouraged to monitor developments closely in the coming months.