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A worker wearing a face mask works on a production line manufacturing bicycle steel rim at a factory, as the country is hit by the novel coronavirus outbreak, in Hangzhou, Zhejiang province, China March 2, 2020. China Daily via REUTERS/Files (REUTERS)
A worker wearing a face mask works on a production line manufacturing bicycle steel rim at a factory, as the country is hit by the novel coronavirus outbreak, in Hangzhou, Zhejiang province, China March 2, 2020. China Daily via REUTERS/Files (REUTERS)

Steel volumes indicate a strong Q3

JSPL reported its highest-ever monthly production volumes of 727,000 tonnes in December

Volume numbers posted by steel firms for the December quarter should support the Street’s confidence in steel stocks. The sales numbers of Tata Steel Ltd, JSW Steel Ltd and Jindal Steel and Power Ltd (JSPL) reflect a strong demand environment. Production numbers have continued to improve, and this coupled with firm realizations should help companies see strong earnings in Q3. The key, of course, is whether the improvement in realizations sustains.

JSPL, on the back of ramped-up production capacities, reported its highest-ever monthly production volumes of 727,000 tonnes in December.

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JSW’s average capacity utilization improved from 86% in Q2FY21 to 91% in the December quarter. Its consolidated operating profit is expected to increase 24% sequentially to 5,300 crore, marking its highest-ever quarterly profit.

Meanwhile, there was some disappointment with Tata Steel’s sales volumes. While production improved, Tata Steel India’s sales at 4.66 MT declined 8% sequentially and 4% year-on-year. Though its domestic deliveries rose, exports shrank. Its shares lost about 2.6% on Monday. However, sales volumes were expected to decline and provisional numbers are in line with analysts’ estimates. Analysts at Edelweiss in their Q3 result preview had said that “Tata Steel’s sales volume is expected to be down as destocking is over".

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