EBIDTA of steel companies to go down by 20-30 bps, steel prices may fall: IndRa

New Delhi: The profitability of the steel makers in the country is expected to go down by as much as 20-30 basis points. The real estate, infra and other construction activities have been affected due to the lockdown and migration of labourers. This is going to knock down EBIDTA levels of steel companies by 20-30 basis points in the ongoing financial year, according to a report by India Ratings (IndRa).

The revenues of the steel players is likely to bottom out in the first six months of the ongoing financial year owing to lockdown in the whole of the first quarter followed by seasonally weak second quarter (July-September period) . 

There will also steel demand contraction by 10-15 basis points in the ongoing financial year due to various reasons like slowdown in auto sector also.

In the coming 6-12 months, steel makers may have to face problems of longer inventory. Liquidity will become very important due to this.

Faced with lower domestic demand scenario, the steel companies are looking to increase  exports. The lower irn ore prices in India have led to Indian steel being more competitive in the certain international markets, especially in Japan, China and Russia. 

On the import side, the anti-dumping duty put in place by India is expected to give cushion the domestic steel firms from Chinese imports. However, imports of steel from free trade zones may put some pressure on domestic prices.

The steel prices can also go down in the current fiscal as the sock is piling up. This is especially true for intermediate steel products, with downstream facilities of almost all primary steel makers being closed during the lockdown.

However, the steel prices may go up in some temporary time-periods due to decreased productions, limiting the supply. 

 

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