MUMBAI – Steelmakers are set to see a sharp drop in their profits in the September quarter as steel prices remain at an over three-year low and weak demand during the quarter weigh on earnings, analysts said. While there has been some respite in input costs – of coking coal and iron ore – it will not be enough to offset the impact of the weak pricing, they said. The net profit of four key steelmakers – Tata Steel , JSW Steel , Steel Authority of India , and Jindal Steel and Power – are seen plunging between 40-100% on year. Some analysts also see SAIL turning loss-making for the quarter. The September quarter is typically the weakest for steel-makers as monsoon rains lower construction activity and demand. This year, there has been additional pressure because of cheap imports flooding the domestic market. “The real estate slowdown in China, which is the largest metal consumer, has resulted in cheaper Chinese exports flooding the global market and keeping the global prices under pressure,” Motilal Oswal Securities said in a note. The government is likely to expand the scope of its stringent quality norms amid this dumping of substandard steel, most of which is coming from China, ET had reported earlier this week. Artificial Intelligence(AI)Mastering C++ Fundamentals with Generative AI: A Hands-OnBy - Metla Sudha Sekhar, IT Specialist and DeveloperView Program Data ScienceSQL for Data Science along with Data Analytics and Data VisualizationBy - Metla Sudha Sekhar, IT Specialist and DeveloperView Program LegalLabour LawsBy - Ankita Ray, Partner: Cyril Amarchand MangaldasView Program MarketingFuture of Marketing & Branding MasterclassBy - Dr. David Aaker, Professor Emeritus at the Haas School of Business, UC Berkeley, Author | Speaker | Thought Leader | Branding ConsultantView Program FinanceA2Z Of MoneyBy - elearnmarkets, Financial Education by StockEdgeView Program LegalData Privacy with General Data Protection Regulation (GDPR)By - Arun S. Prabhu, Partner (Head- Technology and Telecommunications): Cyril Amarchand MangaldasView Program Artificial Intelligence(AI)AI for Everyone: Understanding and Applying the Basics on Artificial IntelligenceBy - Ritesh Vajariya, Generative AI ExpertView Program MarketingModern Marketing Masterclass by Seth GodinBy - Seth Godin, Former dot com Business Executive and Best Selling AuthorView Program TechnologyCybersecurity MasterclassBy - Gaurav Khera, Partner, Risk Advisory: DeloitteView Program Artificial Intelligence(AI)Java Programming with ChatGPT: Learn using Generative AIBy - Metla Sudha Sekhar, IT Specialist and DeveloperView Program Web DevelopmentMastering Full Stack Development: From Frontend to Backend ExcellenceBy - Metla Sudha Sekhar, IT Specialist and DeveloperView Program Artificial Intelligence(AI)Master in Python Language Quickly Using the ChatGPT Open AIBy - Metla Sudha Sekhar, IT Specialist and DeveloperView Program StrategyESG and Business Sustainability StrategyBy - Vipul Arora, Partner, ESG & Climate Solutions at Sattva Consulting Author I Speaker I Thought LeaderView Program MarketingDigital marketing - Wordpress Website DevelopmentBy - Shraddha Somani, Digital Marketing Trainer, Consultant, Strategiest and Subject Matter expertView Program Office ProductivityZero to Hero in Microsoft Excel: Complete Excel guide 2024By - Metla Sudha Sekhar, IT Specialist and DeveloperView Program FinanceA2Z Of Finance: Finance Beginner CourseBy - elearnmarkets, Financial Education by StockEdgeView Program FinanceFinancial Literacy i.e Lets Crack the Billionaire CodeBy - CA Rahul Gupta, CA with 10+ years of experience and Accounting EducatorView Program MarketingPerformance Marketing for eCommerce BrandsBy - Zafer Mukeri, Founder- Inara MarketersView Program Estimates show that India has imported 3.45 million tonne of steel between April – August, while exports lagged at 1.92 million tonne, making India a net importer of the alloy for the period. As compared to the June quarter, prices of hot-rolled coils in the local market have declined by an average of 5-6% in the September quarter to around Rs 50,000 per tonne. While prices of flat steel products are down for the third quarter in a row with a decline of around 5%, the correction in long steel products is sharper at around 10%. As a result, the blended realizations for steel-makers is seen Rs 2,500 – Rs 3,500 lower per tonne compared to the June quarter. The subdued demand for steel has weighed on prices of coking coal as well, which are down $15-25 per tonne for steel-makers. While prices of iron ore have also trended lower, these are expected to benefit non-integrated players more. Even with the correction in these input costs, the operating profit made by steel-makers on each tonne of steel they sell is seen Rs 1,500 – Rs 3,000 lower sequentially. OUTLOOK While the September quarter could result in some earnings downgrades, a host of factors are seen boosting earnings in the second half of the year. The recent measures taken by China to prop up its real estate market, and the onset of the construction period in the domestic market is seen helping steel prices, analysts said. “…the possible cut of steel production by China in Winter, expiry of Bureau of Indian Standards (BIS) certification for some steel mills exporting to India and planned maintenance shutdown by major mills of South Korea, also should support HRC prices in the near term,” Elara Securities said. The export prices in China have already moved up by 15% over the past few days, which will allow domestic steel-makers to hike prices. Average prices in the current quarter are likely to be Rs 1,500 – Rs 2,500 higher than the September quarter. Combined with the impact of lower coking coal prices, the December quarter is seen resulting in a significant sequential improvement for stee-makers. (You can now subscribe to our Economic Times WhatsApp channel) (You can now subscribe to our Economic Times WhatsApp channel)
