Falling prices of key raw material like iron ore and coking coal in the international markets are likely to boost margins of domestic steel manufacturers up to 3 per cent this financial year, say analysts.
"Due to the falling iron ore and coking coal prices, domestic steel companies may see up to 3% expansion in their margins this fiscal," senior analyst with Angel Broking Bhavesh Chauvan told PTI here.
Currently, coking coal is hovering around $215 a tonne from a high of $350 sometime back, as supply-side issues eased in Australia, which is one of the largest producers of the commodity.
Similarly, iron ore prices have also fallen due to slowing demand in China, which is the world's largest consumer and producer of steel, and Europe.
On the steel prices, which have been stable since the past few months, Chauvan said despite falling raw material prices, steel prices are being maintained at the current level due to a depreciating rupee.
"Steel prices are being maintained at the current level due to the rupee depreciation. As the rupee appreciates, this is likely to push steel prices higher," he said.
At present, domestic steel prices are hovering around Rs 32,000 per tonne.
Referring to margins, an analyst with Karvy Comtrade, Sumit Mukherjee, said: "There may be slight increase in the margins due to the fall in raw material prices."
However, the margin expansion may not be sustainable as fall in input prices may not continue for long, he said.
On steel prices, Mukherjee said: "As the monsoon set in, there will be some reduction in prices due to slowing of construction activities. However, this will be limited to 5-6%," he said.
Earlier, JSW Steel Joint Managing Director and Group CFO Seshagiri Rao had said the fall in input prices would give some comfort to the industry in the near future.
Also, SAIL chairman C S Verma had also said margins were comfortable now due to the falling raw material prices.
