Trade war to slowdown in demand: Margin pressure on metals to continue

The metal sector saw the sharpest fall in profitability with their margins down 1,600 basis points year-on-year in the March quarter to 23.3 per cent. The sector was a laggard even on the net profit front as falling prices and weak global demand put pressure on realisations. In addition to the fall in prices, input costs such as coking coal, as well as iron ore, remained on the higher side, leading to a double whammy on margins. 

While there is an uptick in the pricing trend, analysts believe that the ongoing trade war between the US and China, as well as a slowdown in Chinese consumption, will continue to put pressure on prices both for ferrous and non-ferrous companies. The other laggards on the margin front were companies in the media, telecom and utilities space. Led largely by these sectors, margins in the March quarter for BSE 100 companies (excluding OMCs and financials) fell 285 basis points. On the other hand, cement, healthcare and infrastructure saw improvement in their margins.