Decline in coking coal prices and a marginal improvement in steel prices are likely to help steel companies report better margins in January-March quarter.
Price of coking coal, one of the key input for steel manufacturing, declined by around $8 to $10 to $135-$138 per tonne compared to previous quarter mainly on weak demand from China, experts said.
“Coking coal prices have declined by around $10 per tonne which would help steel companies to improve margins in January-March quarter,” said Seshagiri Rao, joint managing director at JSW Steel.
A senior official from Steel Authority of India said, internationally coking coal prices have declined by around $8-$9 per tonne and are likely to benefit steel manufacturers.
The Indian steel industry is showing a positive upswing in demand and the trend is expected to continue in 2014, helped by increased spending on infrastructure, said CS Verma, chairman, SAIL.
Internationally coking coal prices declined by $8 said an Essar Steel official but said that the benefit for steel companies would be marginal.
In January most of the steel companies increased prices by around Rs 1,000 per tonne and this would further help them to report better profits.
January-March is considered to be the peak season for steel companies.
Analysts too said since January-March is the peak season for steel companies and if they are able to continue to increase prices in the quarter their margins would improve.
Bhavesh Chauhan, an analyst at Angel Broking said, “This is the peak quarter for steel companies and already in January there has been a price increase taken by them. If the steel companies are able to sustain the price increase profits would further increase.”
Sanjay Jain, an analyst at Motilal Oswal, said, if the steel companies are able to retain price hike of steel it would benefit them but if they are forced to cut prices and pass on the benefits of lower input costs due to continued weak demand in the domestic market then the margins will be under pressure.
Domestic demand continues to remain subdued as demand from sectors like auto, real estate, infrastructure among others continued to remain low, Jain said.
However, since steel companies are focusing on exports to boost sales and they might benefit from the lower input costs.
The country turned a net exporter in April-December, with exports of carbon steel at 3.822 million tonnes, exceeding imports of 3.298 million tonnes. The export of alloy and non-alloy steel also exceeded total imports by 37,000 tonnes.
Source:- mydigitalfc.com
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