Morgan Stanley sees India steel stocks continuing gains

Morgan Stanley anticipates continued growth for Indian steel stocks, as hot-rolled coil prices rose 1% week-over-week to Rs58,500 per ton, a 27% increase since mid-December lows. Secondary rebar prices also climbed 2% week-over-week to Rs45,400 per ton, a 6% rise since mid-December. Domestic HRC prices were trading at a 5% discount to import parity, unchanged from the prior week.

China CFR iron ore prices at 61% Fe content remained steady at around $96 per ton, with domestic prices at a 51% discount to parity, below their five-year average of 55%. Australian hard coking coal prices surged 10% week-over-week to approximately $250 per ton, up 12% month-over-month, likely due to supply disruptions in Shanxi.

Spreads narrowed by about 2% during the week, down 9% since April 2026 but up 30% from mid-December lows. Imports have increased, but the bank expects them to stabilize as domestic prices stay below import parity. Strong demand and reduced production, partly due to seasonal maintenance shutdowns, have led to inventory depletion.

Morgan Stanley expects some restocking in the coming months as production rises with capacity expansions. Steel stocks have gained 8% year-to-date, in contrast to the Sensex's 9% decline. While Morgan Stanley expects near-term price weakness during monsoon season, it maintains a positive medium-term outlook, citing government support, supply-demand balance, and China's anti-involution measures.