Pressure on India steel players expected due to declining realisations
Indian steel markets witnessed a soft quarter with prices down 3-4% sequentially, JM Financial Institutional Securities reported. Spreads are likely to be under pressure in 4QFY24 due to lower realisations and higher coking coal costs, leading to an estimated EBITDA margin compression of Rs 1.5k+/ton QoQ. Volume growth is expected to be higher.
As global steel making raw materials saw a decline, with spot coking coal down at US$270/t and iron ore at ~US$100/t, Chinese HRC and rebar prices also decreased. China’s steel exports rose in Jan/Feb, further impacting global markets, the brokerage noted.
The trend of decreasing steel and raw material prices is likely to offer some relief in terms of working capital requirements, potentially leading to a reduction in net debt. This comes as a welcome development for steel players in India amid the challenging market conditions.
Overall, the steel industry is facing a complex mix of factors that are affecting prices and margins. With a combination of lower realisations, higher costs, and global market pressures, steel players will need to navigate carefully to ensure sustainable growth and profitability in the coming quarters.