Profitability of domestic steel mills improves

According to a recent report by leading credit rating agency ICRA, domestic steel prices have reported a healthy growth of 14% since June 2017, aided not only by a sharp recovery in international steel prices but also by an improvement in domestic demand growth to 4.4% in Apr-Aug 2017, from 2.6% in FY2017. Buoyant international steel prices have also benefitted Indian mills to increasingly tap overseas markets, as reflected in a 57% year-on-year growth in exports during Apr-Aug 2017, helping the domestic steel industry operate at a capacity utilisation of above 80% in the current financial year. This is expected to improve the profitability of domestic steel mills in the near term.

Says Jayanta Roy, Senior Vice-President, and Group Head – Corporate Sector Ratings, ICRA, “The sharp rise in domestic steel prices has been fuelled by rising international prices. The Chinese hot rolled coil (HRC) export prices increased by about 40% since mid-May 2017, reaching US$ 588 per metric tonne (MT) in the third week of September 2017, supported by China’s resilient domestic demand and its supply-side reforms to check the domestic steel overcapacity”. Chinese steel production grew at a healthy rate of 5.1% in Jan-Jul 2017 and kept the global steel capacity utilisation rates above 72% in the last five months against 68.2% in December 2016.”

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