Domestic consumption of steel rose 9% in the June quarter, while production rose just 6%. Because of this India became a net importer of finished steel. According to the report, demand in the infra and auto sectors remains strong, but the rising cost of raw materials is a matter of concern.
New Delhi [भारत]July 19 (ANI): Domestic finished steel consumption remained strong in the June quarter, according to HDFC Securities Institutional Research’s Q1FY27 results preview report. Consumption was supported by spending on infrastructure, real estate activities, automobile manufacturing and demand for heavy engineering. During this period, demand outstripped production, resulting in India becoming a net importer of finished steel.
Consumption booms, production slows
“Domestic consumption of finished steel (FS) in India remained healthy in Q1FY27 and grew by about 9% YoY,” the report said. The growth was attributed to “continued momentum in capital expenditure on large-scale public infrastructure, steady demand from real estate and urban development projects, growing demand from automotive manufacturing and heavy engineering sectors”. It also said that “FS production growth slowed to 6% y-o-y, leading to net imports in Q1FY27.”
Mixed trend in steel prices
On prices, the report said domestic hot-rolled coil (HRC) prices continued to strengthen during the quarter, while rebar prices moderated after mid-April. As a result, the brokerage expects steelmakers to report higher mixed realizations for the quarter, although rising raw material costs are likely to weigh on margin gains.
Impact of rising costs on margins
“While domestic HRC (flats) remained bullish in Q1FY27, resale (longs) witnessed softening from mid-April 26,” the report said. It further said, “We estimate that steel companies will continue to deliver high quarter-on-quarter mixed realizations in Q1FY27.” However, “Steel companies will also record higher cost of production (COP) as both coking coal and iron ore prices are rising,” with coking coal prices expected to rise by around US$ 15-20 per tonne quarter-on-quarter and iron ore prices by around Rs 300 per tonne. “This should lead to strong pricing gains that should underpin gross and EBITDA margin expansion,” the report said.
Despite higher input costs, the brokerage firm maintained a positive outlook on the domestic steel sector citing healthy demand and supportive pricing. (ANI)
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