Indian steel and base metal companies are expecting growth in profitability during the next quarter, compared to the previous quarter, reports Business Standard.
The report says the profit for these companies may increase because of decreasing prices of key inputs and stable domestic prices. It is believed that operating margin for base metal companies may go up by 50 basis points (bps) and for steel companies it may go up by 350 bps.
According to the report, India’s largest aluminium rolling company, Hindalco, is likely to improve its sales; however, its net may fall by 30 percent on a standalone basis and by 20 percent on a consolidated basis.
Domestic coal and iron ore prices registered rises in Q1 and Q2 even as availability of iron ore also remained a problem because of a ban on illegal mining in the south Indian state of Karnataka that affected production and cost for some steel mills.
However, the domestic coal prices are now on normal levels and the Supreme Court has also partially lifted the ban on some mining activities in Karnataka state that will make the key raw material — iron ore — available.
Recent reports suggest that the Indian steel sector is likely to grow this year. Ernst & Young has released a cautious outlook for 2012. According to Ernst & Young, in 2012, the global steel sector is expected to grow, although at a lower rate.
E&Y has said that in 2012 Chinese steel production and consumption will continue to outperform the rest of the world. The steel sectors in other emerging countries, such as India, Russia, Brazil and South Korea, will continue to grow, although the uncertain economic outlook may have some effect on these economies. In India, however, demand for steel from the domestic sector is creating a positive outlook as India is expected to perform better than most.
A recent report –“Indian Steel Industry Outlook to 2012” — published by RNCOS, a leading market research and information analysis company, says that Indian crude steel production will grow at a CAGR of around 10 percent during 2010-2013.
According to the World Steel Association (WSA), global steel demand is expected to register 5.4 percent growth in the current year to around 1.5 billion metric tons on higher consumption from developing nations.
Global steel production grew by a meager 1.1 percent during the January-March period of the year to 376.76 million tons compared to the corresponding period last year, WSA data said. Global steel production was 372.77 million t0ns in the same period last year.
WSA members produce 85 percent of the world’s steel. Asia produced 241.7 million tons — nearly 56 percent of the total output. The growth in Asia was 1.5 percent.
According to WSA, during March, the world steel production was at 132 million tonnes, an increase of 1.8 percent compared to March 2011. India’s production grew marginally to 6.2 million tons in the month from 6.1 million tons in March last year.
It may be recalled that India’s steel consumption was around 68 million tons in 2011.
Actually, Indian steel companies have already raised prices by Rs 1,000-2,000 ($20-$40) a ton.