Steel companies may see improved demand and better margins in quarter three of the current fiscal year, according to a report by Centrum.
The report expects the demand to improve in Q3FY25 as the monsoon has receded, and also price hike is seen in long steel while flat steel prices have remained unchanged.
“We expect demand to improve in Q3FY25 as monsoon has receded and also seen some price hike for long steel while flat steel prices have remained unchanged QoQ. Further, coking coal cost is further expected to decrease by USD25/t in Q3FY25 aiding better margins QoQ,” said the report.
It said that looking ahead in Q3FY25, steel companies are expected to see higher profitability, driven by increased long steel prices and stable flat steel prices, along with reduced coking coal cost.
The report adds that net debt for steel companies has increased overall by an average of 6-20 per cent QoQ in Q2FY25 due to ongoing capex expansion.
In the non-ferrous segment, lower cost and better product mix had supported earnings amid base metals prices decline during Q4FY24.
The average LME aluminium price declined by 5.5 per cent QoQ to USD2,382/tonne, and the average zinc price declined by 2 per cent QoQ to USD2,779/tonne.
For non-ferrous, aluminium and zinc, prices are expected to increase in Q3FY25 and drive higher earnings for the companies (QoQ).
Because of a sharp fall in steel realization the steel companies under coverage reported a 3 per cent decline in earnings before interest, taxes, depreciation, and amortization (EBITDA) in quarter two of the current fiscal, says a report by Centrum. However, it adds that the decline was partially offset by fall in raw material prices.
The report expects that non-ferrous companies have realised improvement in operational performance by 3-20 per cent (QoQ).
For Ferrous companies, it was a challenging quarter as domestic steel producers reported Rs 700-1700 per tonne EBITDA losses (QoQ).
Average coking coal prices were down by USD 25-30/tonne (QoQ). The derived realisation/tonne declined steeply by Rs 3,000-Rs 6,200/tonne.
