Domestic steel prices are witnessing a sharp recovery, creating a potentially stronger earnings environment for steelmakers heading into the second half of FY27. Despite the usual seasonal slowdown in demand during the monsoon, prices of key steel products have continued to rise, supported by lean inventories, supply constraints, and higher input costs. Against this backdrop, domestic brokerage Motilal Oswal expects the steel cycle to shift from a volume-led recovery towards a pricing- and cost-led earnings recovery.
HRC prices hit a four-year high
The most significant development has been the sharp rise in flat-steel prices. According to Motilal Oswal, domestic hot-rolled coil (HRC) prices increased 7% month-on-month to ₹62,000 per tonne in September 2026, marking a four-year high. Cold-rolled coil (CRC) prices also rose 8% MoM to ₹70,500 per tonne. The rise across key products indicates that the pricing recovery is not restricted to a single segment of the steel market.
The rally has also extended to long steel. Rebar prices climbed to ₹56,800 per tonne in September from ₹48,850 per tonne in June, pointing towards a broad-based improvement in steel realizations. For producers, stronger selling prices can provide a direct boost to revenue realizations, although the ultimate impact on margins will depend on how raw-material costs move.
Why are steel prices rising?
One of the key reasons behind the price recovery is the relatively tight supply-demand balance. Motilal Oswal said lean channel inventories and maintenance-led supply constraints have supported prices despite seasonal weakness. With distributors carrying lower inventories and some supply temporarily constrained, producers have been able to maintain pricing power in the domestic market.
At the same time, steelmakers are dealing with a higher cost base. Premium Australian coking coal prices have increased to around $300 per tonne from $260 per tonne in June 2026, while iron ore and pellet prices have also remained firm. Motilal Oswal estimates that every $10 per tonne increase in coking coal prices can add roughly $7–8 per tonne to input costs. This makes steel-price increases important for producers looking to protect profitability.
Domestic demand remains supportive
The demand backdrop has remained relatively healthy despite seasonal weakness. Motilal Oswal estimates that India’s finished steel consumption grew 7.2% YoY to 70.3 million tonnes between April and August 2026, while finished steel production increased 3.7% YoY to 67.4 million tonnes. The faster growth in consumption compared with production has contributed to a relatively tight domestic market.
Government data separately showed finished-steel production at 68.1 million tonnes and consumption at 70.3 million tonnes during April-August 2026, confirming that consumption growth has outpaced production growth during the period.
The global backdrop is also showing signs of tighter supply. Global crude steel production declined 0.6% YoY to around 1.08 billion tonnes during January-July 2026, while China’s production fell 3.1% to nearly 577 million tonnes. Lower Chinese output can be relevant for global steel balances given the country’s large role in steel production and exports.
Motilal Oswal expects a stronger H2FY27
Motilal Oswal remains constructive on domestic steel pricing and expects the sector to enter H2FY27 with a stronger realisation environment if post-monsoon demand normalises as expected. The brokerage believes steel realisations could come in considerably stronger than current consensus assumptions. It also highlighted that companies with stronger cost positions, captive raw materials and greater downstream or value-added exposure could be better placed to defend margins as input costs remain elevated.
Motilal Oswal’s top steel picks
Against this backdrop, JSW Steel and Tata Steel are Motilal Oswal’s top picks in the sector. The brokerage has set a ₹1,340 price target an upside of 6% from the current levels, for JSW Steel and a ₹220 target an upside of 20% form te current levels for Tata Steel. Its thesis is primarily based on stronger domestic realisations, healthy underlying demand and the potential for further improvement in pricing during H2FY27.
Broader industry impact
The impact of higher steel prices, however, extends beyond steel producers. A sustained increase in steel prices can support the top line and realizations of steelmakers, particularly when demand remains resilient. On the other hand, automobiles, engineering, infrastructure, construction, and other steel-consuming industries may experience higher input costs. The eventual impact on their margins will depend on how much of the increase can be passed through to customers.
Conclusion
The recent steel-price rally marks an important shift in the domestic steel market, with HRC reaching a four-year high and long-steel prices also recovering sharply. Lean inventories, constrained supply, healthy domestic consumption and rising raw-material costs have combined to support prices.
Motilal Oswal expects this environment to remain favorable in H2FY27 and has picked JSW Steel and Tata Steel as its preferred steel names. The broader takeaway for investors is that continued strength in steel prices could support producers’ realizations, while steel-consuming industries may have to manage a higher input-cost environment.