Steel companies are set for another bumper profit in this quarter despite weak demand and high raw material cost.
The second wave of the pandemic has hit the domestic steel demand in the June quarter with 22 per cent fall in April, and further decline of one per cent sequentially in May. However, compared to last year, the demand in April and May is up 150 per cent as 2020 saw more stringent lockdown.
Despite weak domestic sales, buoyant international demand and steel prices supported the domestic steelmakers.
India remained a net exporter of steel with 122 per cent year-on-year growth in April. The export momentum continued in May with a 30 per cent month-on-month growth.
“Domestic demand is expected to revive in June and push up capacity utilisation with gradual lifting of lockdowns, ease of mobility and improving vaccination coverage,” said ICRA.
Jayanta Roy, Senior Vice-President, Corporate Sector Ratings, ICRA said the steel prices globally has been buoyant as China’s export hot-rolled coil price shot up by 53 per cent to $1,065 tonnes between January-May before falling to $945 tonnes in the first week of June, following Chinese government’s clampdown on the financial markets to rein in the price speculation.
While the proposed steel production cuts in the Tangshan region of China, withdrawal of export rebates since May and market expectation of an export duty on steel exports would keep international steel prices high.
Despite environmental concerns, China’s steel exports grew by 24 per cent to 31 million tonne in five months of this year due to the low-base last year.