)
FY13 is not ending on a good note for domestic steel companies as the earnings are expected to decline because of the low steel prices and demand when compared to the same period of 2011-12.
Although, steel companies in India did try to increase prices every month since January, they were still lower by roughly 10% over the same period of the earlier year. Also, the steel demand growth in FY13 has been subdued. During April 2012-February 2013, the steel consumption, too, grew by a dismal 4.1% as against 5.5% in April-March 2012.
Angel Broking, in its result preview dated April 3, said, “For 4Q FY2013, on a y-o-y basis, we expect net sales of steel companies to decline on the back of lower steel prices. Thus, we expect the top-line of steel companies under our coverage to decline modestly y-o-y. Also, we expect their margins to decline due to lower prices on a y-o-y basis.”
It went ahead to say that the net sales and PAT of SAIL is expected to decline by 13.1% and 14.9%, respectively. For JSW Steel, it expects the net sales to go down by 7.7% and PAT is expected to slide down by a massive 51%.
Although, margins for steelmakers are likely to expand because of the lower iron ore and coking coal prices.
The iron ore prices in India declined in the fourth quarter due to lack of demand for steel. Coking coal, too, stood at $165 per tonne which has continued to slide for the entire year. However, the depreciation of the rupee is likely to offset any gain that the Indian steelmakers might have got from the lower coking coal prices. Tata Steel and SAIL are the only two steelmakers in India who have partial captive supplies for coking coal. Rest of the sector has to import coking coal heavily from Australia.
Even after the low demand and prices for steel in the quarter, steelmakers continued to hike production. Tata Steel increased its hot metal production by 25% in the fourth quarter ended March 31, 2013. Its saleable steel production stood at 2.2 million tonne as against 1.7 million tonne in the same quarter of FY12, up by 27%. Sales, too, went up by 29%.
For JSW Steel, crude steel production in the fourth quarter went up by a mere 2% to 2.1 million tonne from 2.06 million tonne in same period of FY12. Flat steel production increased by 11% and long steel contracted by 6%.
