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Business News/ Markets / Mark To Market/  Steel makers see fall in prices; opportunities emerge in export markets
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Steel makers see fall in prices; opportunities emerge in export markets

Indian producers can capitalize on the opportunities in the export markets against the backdrop of the ongoing energy crisis in Europe

Domestic hot-rolled coil prices fell by Rs700 per tonne week-on-week to Rs55,200 per tonne (josemoraes)Premium
Domestic hot-rolled coil prices fell by Rs700 per tonne week-on-week to Rs55,200 per tonne (josemoraes)

Operating conditions for steel manufacturers have deteriorated with a further fall in steel prices and rising coking coal prices. The demand environment continues to remain muted. Domestic hot-rolled coil prices fell by Rs700 per tonne week-on-week to Rs55,200 per tonne, said a report by Nomura Financial Advisory and Securities (India) dated 12 September quoting SteelMint. They further added that the average price in September so far is 3% below the average seen in August.

Further, there is increased pressure on margins due to a sharp rise in coking coal costs after a brief period of softening trend. However, on the bright side, iron ore prices continue to remain stable.

Even so, a meaningful pick-up in demand for the metal is key. The September quarter (Q2FY23) is expected to bear the brunt of seasonality and the demand is likely to improve thereafter.

“Our channel checks indicate that dealers are adopting a cautiously optimistic approach towards demand revival in H2FY23," said analysts at Edelweiss Securities in a report on 9 September.

Meanwhile, the Indian producers can capitalize on the opportunities in the export markets against the backdrop of the ongoing energy crisis in Europe, point out analysts at Edelweiss Securities.

But due to the levy of export duty on finished products, there is increased potential for the export of semi-steel. The export duty is a key overhang on stocks of steel companies and a positive development on that front would aid investor sentiments. Shares of Tata Steel, JSW Steel, and Jindal Steel & Power are down by 13-28% from their respective 52-week highs.

SteelMint noted that Ministry of Commerce has seen a fall in steel prices since the imposition of export duty of 15% in May-22, but is waiting to ascertain if the price decline resulted from weak seasonal demand during the monsoon season or due to the export duty cut, said the Nomura report. “A consideration on rollback or cut in export duty will be taken after ascertaining reasons behind the fall. The duty may be retained unless it is established that the decline in prices was on duty imposition and not due to the seasonal monsoon factor," added the report.

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ABOUT THE AUTHOR
Vineetha Sampath
Vineetha is a part of the Mark to Market team, which specializes in offering cutting edge commentary on stocks and financial reports of companies. Vineetha looks at varied number of sectors, including automobile, aviation, FMCG, internet companies and metals. If you want to know -- why entry-level auto sales are not picking up; or which FMCG companies would be more adversely impacted due to weak rural demand; or why IndiGo’s landing is about to get tougher? You will find these answers and more in her stories. Vineetha is a chartered accountant.
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Published: 12 Sep 2022, 11:38 AM IST
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