Profits for most steelmakers are expected to decline for the third consecutive quarter, despite an increase in domestic steel consumption, according to analysts. The December quarter, typically a strong period for steel producers, has been impacted by an influx of cheaper steel imports, which have put downward pressure on domestic prices and profitability.
Finished steel imports into India have reached a six-year high, with over 7 million tonnes imported between April and December 2024. Average steel prices dropped 15% year-on-year and over 5% quarter-on-quarter in the October-December period, with flat steel prices continuing to decline while long steel products saw some recovery.
Steelmakers with a higher proportion of long steel products, like Jindal Steel and Power (JSPL) and Steel Authority of India (SAIL), are expected to fare better than those with a higher share of flat steel, such as JSW Steel and Tata Steel. Nuvama Institutional Equities noted that JSPL and SAIL may post higher EBITDA per tonne, while JSW and Tata Steel are likely to see profitability declines.
In addition to the price variations between flat and long steel, raw material prices have moved in opposing directions. Coking coal prices have fallen, while iron ore prices have increased. Companies with captive iron ore mines are expected to benefit from this price shift.
While India’s steel consumption grew 12% year-on-year to nearly 100 million tonnes between April and November 2024, weak demand in China and increased exports from India have negatively impacted earnings.
JSW Steel, India’s largest steel producer, has already reduced its capital expenditure for the year, and other companies may follow suit if steel prices remain subdued. Analysts suggest that Chinese stimulus, US tariff actions, and decisions on safeguard duties will be key factors influencing steel prices moving forward.
(ET)