In its latest report, Motilal Oswal Financial Services has highlighted a significant surge in domestic steel prices during the second quarter of FY27, despite typical seasonal weaknesses. The brokerage attributes this trend to lean channel inventories, supply constraints due to maintenance, and rising input costs, which have collectively supported prices.
Domestic hot-rolled coil (HRC) prices increased by 7% month-on-month to reach a four-year high of Rs 62,000 per tonne in September. Similarly, cold-rolled coil (CRC) prices rose by 8% MoM to Rs 70,500 per tonne. Rebar prices also saw a sharp recovery, climbing to Rs 56,800 per tonne in September from Rs 48,850 per tonne in June, indicating broad-based pricing strength across both flat and long products.
The brokerage notes that the improvement in steel prices is primarily due to cost pass-through, as input costs for coking coal, iron ore, and pellets have risen. Premium Australian coking coal prices have increased to $300 per tonne from $260 per tonne in June 2026, with every $10 per tonne increase in coking coal adding approximately $7-8 per tonne to input costs, creating a margin headwind.
Domestic steel volumes have remained healthy, with India producing around 67.4 million tonnes of finished steel from April to August this year, marking a 3.7% year-on-year increase. Finished-steel consumption grew by a stronger 7.2% YoY to 70.3 million tonnes, keeping the domestic market tight.
Globally, crude steel production declined by 0.6% YoY to around 1.08 billion tonnes between January and July, with China's output falling by 3.1% YoY to nearly 577 million tonnes. The decline in Chinese steel output is significant for global market balance, given China's major role in global steel production and exports.
Motilal Oswal remains optimistic about domestic steel pricing in the near term, expecting a transition from volume-led recovery to pricing and cost-led earnings growth. The brokerage believes that lean inventories, constrained supply, resilient consumption, and global cost inflation will support higher steel prices. Companies with stronger cost positions and greater downstream exposure are expected to better defend margins.
Background
The steel industry has been experiencing fluctuating prices due to various factors, including global supply chain disruptions and changes in raw material costs. The current surge in prices comes amid a backdrop of rising input costs and constrained supply, both domestically and globally.
Looking ahead, the brokerage has identified JSW Steel and Tata Steel as its top picks among steel companies. JSW Steel shares have gained around 9% in 2026 so far, while Tata Steel shares have risen by 3% in the same period. Both companies are well-positioned to benefit from the current market dynamics.
