Steel Industry Poised for Growth: Improved Demand and Better Margins Expected

Steel companies are expected to see improved demand and better margins in Q3FY25 due to seasonal changes and strategic pricing. While long steel prices are rising, flat steel prices remain stable. Decreased coking coal costs could also enhance profitability, despite challenges faced earlier in the fiscal year.

Steel companies could witness improved demand and profitability in the third quarter of the current fiscal year, as projected by a report from Centrum. The report highlights that with the retreat of the monsoon, demand is anticipated to rise in Q3FY25. Additionally, a price hike in long steel is expected, while flat steel prices have remained unchanged.

"We anticipate that demand will increase in Q3FY25 as the monsoon recedes," stated the report, "This, combined with a noticeable price hike for long steel and stable flat steel prices, along with an anticipated reduction in coking coal costs by USD 25 per tonne, will result in improved margins." The report suggests that steel companies are poised for higher profitability through increased long steel prices and decreased coking coal costs.

Despite a generally challenging environment, in Q2FY25, net debt for steel companies increased by an average of 6-20% quarter-on-quarter due to capex expansions. In the non-ferrous sector, decreased costs and a better product mix supported earnings amidst a decline in base metals prices during Q4FY24. The report notes an average LME aluminium price drop by 5.5% to USD 2,382 per tonne and a 2% drop in average zinc prices to USD 2,779 per tonne, projecting potential price increases and higher earnings in Q3FY25.

(With inputs from agencies.)