Steel companies may see hiked demand, better margins in Q3 FY25: Centrum report
- IBEF
- November 20, 2024
Steel companies are expected to see improved demand and better margins in Q3 FY25, as per a report by Centrum. The demand outlook is positive, with the monsoon season receding and an observed price increase in long steel. In contrast, flat steel prices have remained stable. Additionally, a further decline in coking coal prices by US$ 25/tonne (Rs. 2,110/tonne) is anticipated to support better margins. Steel companies are expected to benefit from the higher profitability, driven by rising long steel prices and stable flat steel prices, alongside reduced coking coal costs. However, net debt for steel companies increased by 6-20% in Q2 FY25 due to ongoing capital expenditure (capex) expansion.
In the non-ferrous sector, earnings were supported by a better product mix and lower costs despite declining base metals prices during Q4 2022-23. The average LME (London Metal Exchange) aluminium price decreased by 5.5% QoQ to US$ 2,382/tonne (Rs. 2,01,040.80/tonne), and zinc prices fell 2% QoQ to US$ 2,779/tonne (Rs. 2,34,547.60/tonne). For Q3 FY25, aluminium, and zinc prices are expected to rise, leading to improved earnings for non-ferrous companies. On the other hand, steel companies saw a 3% decline in EBITDA in Q2 FY25, mainly due to a sharp fall in steel realization. However, lower raw material prices partially offset the impact. Ferrous companies faced a challenging quarter, with domestic steel producers reporting EBITDA losses of US$ 8.29-20.14/tonne (Rs. 700-1,700 per tonne), as average coking coal prices dropped by US$ 25-30/tonne (Rs. 2,110-2,532/tonne).
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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