According to Icra, the demand environment is expected to improve somewhat in the second half of FY2020, following a likely pick-up in infra spending.
“Industry operating environment remains challenging in FY2020 thus far. However, a likely pick-up in infra spending in the second half and softer coking coal prices could benefit steelmakers for the remainder of the year. Profitability may recover somewhat in Q3, with a sharp fall in coking coal prices in August 2019 and expectation of better demand from the construction sector during that quarter,” Jayanta Roy, senior vice-president and group head – corporate ratings was quoted as saying.
Given the challenging operating environment prevailing at present, ICRA estimates the industry’s operating margin to decline to around 18 per cent in FY2020, compared to 23 per cent in the previous fiscal.