Taking cues from a weak demand scenario, domestic steel output has also declined 1.7 per cent YoY in September to 8.2 million tonne. All steel producers reported YoY decline in production, said SBICap.
Tata Steel, Sajjan Jindal-led JSW Steel, Jindal Steel & Power and state-owned Steel Authority of India (SAIL) are among other top primary producers of steel in the country. State-owned Rashtriya Ispat Nigam’s production has been on a declining trend since Jul’19, with 25 per cent YoY fall in September as it struggles to liquidate inventory, said the report.
Tata Steel in its release said it sold 4.14 million tonne in the September quarter, down from 4.32 million tonne in the corresponding period last year.
Meanwhile, Sajjan Jindal-led JSW Steel has reported a crude steel output drop of 8 per cent on YoY basis in the September quarter at 3.84 million tonne. Its flat steel production was also down by 8 per cent on YoY basis. Also, total crude steel output of the firm during first half of the year has declined 3 per cent on YoY basis.
Alongside, spot raw material spread is also down 25 per cent YoY to Rs 20,785 per tonne, said Edelweiss Securities report.
While the domestic demand and pricing scenario remained grim, players have tried to make up for the poor sales by increasing export volumes. “Exports jumped 73 per cent YoY and 3.7 per cent month-on-month to 1.02 million tonne in September and have now remained 1 million tonne per month run-rate for the second consecutive month. This reflects steel producers’ strategy to clear high levels of inventory built-up due to weak domestic demand,” said SBICap report.
“Though we have pushed up volume sales via exports, realisations remain feeble and so margins will face the heat,” said an Essar Steel source.
Essar Steel, under the Insolvency and Bankruptcy Code scanner, has Rs 54,547 crore of dues of financial lenders and operational creditors.
“We find the current decline in steel price unnerving. Over the past four months, the cumulative dip in steel prices has been 16 per cent. Our estimates remain below consensus and we find significant risk to the Street’s earnings estimates, especially Tata Steel and SAIL, as the prevailing low prices are still not reflecting,” said Edelweiss Report.
While the brokerage recommends ‘reduce’ on SAIL and ‘hold’ on Tata Steel and JSW Steel, it is positive on Jindal Steel and recommends ‘buy’. “In our view, JSPL is expected to fare relatively better due to its exposure to longs (steel products) and niche products such as rails and specialty plates,” said Edelweiss.
Long steel products are used in construction and infrastructure segment, while flat steel is used in auto sector.