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Profits of most steelmakers are set to decline year-on-year for the third consecutive quarter in this financial year, even as the consumption of steel in the country increased during the period, according to analysts and brokerages.
While the December quarter marks the start of a seasonally strong period for steel producers, an influx of cheaper imports continued to weigh on prices of the alloy, hitting the profitability of domestic producers.
Imports of finished steel in India are at their highest level in six years, with more than 7 million tonnes of steel imported between April and December 2024.
Prices of steel were down 15% year-on-year and more than 5% quarter-on-quarter on average during the October-December period. While there was some recovery in steel prices over the previous quarter, prices of only long steel products rose, while those of flat steel pro ducts continued to decline.
As a result, the earnings of most steelmakers are expected to show a mixed trend for the December quarter, with those having a higher share of long steel in their product mix, such as Jindal Steel and Power and Steel Authority of India, likely to fare better than JSW Steel and Tata Steel, which have a higher proportion of flat steel products.
“We expect companies such as JSPL and SAIL (with longs comprising more than half the volume) to post higher EBITDA/t, and JSW and Tata (with flats accounting for 75–80% of volume) to record a decline in profitability,” Nuvama Institutional Equities said.
Apart from the divergent trend in flat and long steel products, raw materials used for making steel — iron ore and coking coal — also moved in opposite directions, with prices of coking coal lower and those of iron ore higher on a sequential basis. As a result, companies with captive iron ore mines are likely to have fared better, analysts said.
Flat steel products find higher application in automobiles and home appliances, while long steel products are used for infrastructure including in railways, highways and bridges.
Although the consumption of steel in India is estimated to have grown 12% year-on-year to nearly 100 million tonnes between April and November last year, weak demand in Chinese markets and consequent exports from India marred the earnings of Indian steelmakers.
The country’s largest steelmaker, JSW Steel, has already cut its capital expenditure for the year, and others could also look at such measures if steel prices remain subdued. “Going forward, Chinese stimulus, tariff actions in the US and the decision on 25% safeguard duty will be the key triggers for the steel prices,” Axis Securities said in a note.
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While the December quarter marks the start of a seasonally strong period for steel producers, an influx of cheaper imports continued to weigh on prices of the alloy, hitting the profitability of domestic producers.
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Profits of most steelmakers are set to decline year-on-year for the third consecutive quarter in this financial year, even as the consumption of steel in the country increased during the period, according to analysts and brokerages.While the December quarter marks the start of a seasonally strong period for steel producers, an influx of cheaper imports continued to weigh on prices of the alloy, hitting the profitability of domestic producers.Imports of finished steel in India are at their highest level in six years, with more than 7 million tonnes of steel imported between April and December 2024.Prices of steel were down 15% year-on-year and more than 5% quarter-on-quarter on average during the October-December period. While there was some recovery in steel prices over the previous quarter, prices of only long steel products rose, while those of flat steel pro ducts continued to decline.
As a result, the earnings of most steelmakers are expected to show a mixed trend for the December quarter, with those having a higher share of long steel in their product mix, such as Jindal Steel and Power and Steel Authority of India, likely to fare better than JSW Steel and Tata Steel, which have a higher proportion of flat steel products.
“We expect companies such as JSPL and SAIL (with longs comprising more than half the volume) to post higher EBITDA/t, and JSW and Tata (with flats accounting for 75–80% of volume) to record a decline in profitability,” Nuvama Institutional Equities said.
Apart from the divergent trend in flat and long steel products, raw materials used for making steel — iron ore and coking coal — also moved in opposite directions, with prices of coking coal lower and those of iron ore higher on a sequential basis. As a result, companies with captive iron ore mines are likely to have fared better, analysts said.
Flat steel products find higher application in automobiles and home appliances, while long steel products are used for infrastructure including in railways, highways and bridges.
Although the consumption of steel in India is estimated to have grown 12% year-on-year to nearly 100 million tonnes between April and November last year, weak demand in Chinese markets and consequent exports from India marred the earnings of Indian steelmakers.
The country’s largest steelmaker, JSW Steel, has already cut its capital expenditure for the year, and others could also look at such measures if steel prices remain subdued. “Going forward, Chinese stimulus, tariff actions in the US and the decision on 25% safeguard duty will be the key triggers for the steel prices,” Axis Securities said in a note.