“Steel producers handled sequentially lower volumes comfortably, aided by firm prices and falling coking coal costs,” said Yes Securities in a note.
Steelmakers’ operating margins before depreciation and amortization (EBITDA margin) benefited from a $10-15 per tonne fall in imported coking coal, easing pressure on costs. Tata Steel and JSW Steel reported strong earnings, while SAIL underperformed as inventory drawdowns hurt margins.
“Steel companies reported aggregate EBITDA of Rs21,000 crore, beating market expectations,” noted Emkay Global Financial Services in a report.Steel producers also gained from policy measures as in April the government had imposed a 12% safeguard duty for 200 days on select flat steel products to curb rising cheap imports. Consequently, finished steel imports dropped nearly 29% year-on-year to 1.4 million metric tonnes in June quarter.
For non-ferrous firms, covering aluminium, zinc, copper, and lead, weaker prices weighed on revenues. Average LME aluminium price slipped 3% year-on-year and 7% sequentially to $2,444 per tonne in the June quarter. Likewise, average alumina prices fell to $359 per tonne, down 16% and 31% by the same yardstick.”The non-ferrous segment posted a soft quarter, as lower aluminium and zinc prices led to a 15.2% sequential EBITDA fall to Rs20,900 crore in total,” said Emkay Global Financial Services.Emkay added zinc and alumina prices rose in the June quarter, which should support sequentially better September quarter earnings for non-ferrous companies.
For steel, demand is likely to stay weak in the current quarter due to monsoon-linked disruption of construction activity. Still, a price hike in August and expected lower input costs may partly offset weaker demand effects. Domestic steel majors have lifted hot-rolled and cold-rolled coil prices by Rs1,000-2,000 per tonne for August, according to Motilal Oswal Financial Services.
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