The weakness reflected on steel prices. While rebar prices were down from Rs 35,751 a tonne to Rs 34,962 a tonne in the first quarter QoQ, it was at Rs 39,658 a tonne a year ago. Hot-rolled coil prices have dropped from Rs 41,242 a tonne in the fourth quarter to Rs 40,525 a tonne in the first quarter of the financial year. From the third quarter, however, the drop is almost Rs 5,000 a tonne. According to analysts, the second quarter is not expected to be any better as the full impact of price reductions in May and June were likely to take effect.
Jayanta Roy, senior vice-president of ICRA, said the second quarter numbers for steel companies
were likely to reflect the downward revision in international prices and weak demand conditions in India.
“Also, the full benefit of coking coal correction may not be available to blast furnace players in the second quarter. The reduction in domestic iron ore prices has also been nominal,” he explained.
Narendran said the second quarter was typically the weakest. “Q3 is when the festive season triggers demand and January to June is generally the strongest period as construction is at its peak.”
Narendran said the auto sector could take a few months to get back into full production, but a revival in construction activity was more imminent. “There are high stocks in the ecosystem, so auto may take a few months to get back into full production," said Narendran.
But there were other externalities that could help the steel sector.
The escalating trade war between China and the US could be an opportunity for India, he said.
After China announced retaliatory tariffs on US goods, US President Donald Trump tweeted on Friday: “Our great American companies
are hereby ordered to immediately start looking for an alternative to China including bringing...your companies
HOME and making your products in the USA.”