Stocks of major steel companies may continue to decline next week on the back of weak fundamentals and expectations of disappointing Jul-Sep earnings. We believe steel prices in India have more to fall, in it Domestic demand for steel is bearish, but steel producers have not reduced plant capacity utilisation. This is leading to an imbalance in the demand-supply scenario of the alloy, in turn keeping sentiment weak for the sector.
There is inventory build-up with steel producers and this will continue to be the situation for some time now since demand is weak. Due to this, the overall outlook for the sector is dull. The global steel sector is also seen weak as industrial activity in leading steel consuming countries remains low because of worries over economic recovery across globe. China is the world's largest consumer and producer of the alloy. Because of this, the demand-supply equation in the country impacts global steel prices.
