If the third-quarter financial jolt was not enough for big steel firms like SAIL, Tata, JSW and Ispat, industry experts have forecast further gloom ahead for the sector in the next three months due to high input costs and slackening demand for the commodity.
"The third quarter was (the) worst (for steel). The next quarter is going to be equally bad on account of input pressure and lower sales, among other things," Angel Broking Research Associate Pawan Burde said.
For the third quarter ended December, steel majors like SAIL and Tata Steel reported an over 50 per cent decline in net profit while others like JSW Steel and Ispat posted a net loss.
"It has been the worst quarter for the steel sector. Almost all firms posted huge declines in net profit mainly due to weak domestic demand and negative consumer sentiment," Karvy Comtrade's Vishal Maniyar said.
Steel demand and prices fell steeply during the reporting period on account of the global industrial downturn, which saw offtake coming down from user industries like automobiles and infrastructure by as much as 40 per cent.
Prices too plummeted by over 50 per cent from the peak of about $1,250 a tonne early last year, eroding profits of the steel majors.
In addition to waning demand and dip in prices, what hit the companies profit margins was high coking coal rates under long-term contracts.
"The adverse impact (due to) higher prices of coking coal alone (accounted for) approximately Rs 2,641 crore for us," SAIL Chairman S K Roongta had said last week.
Selling at $96 a tonne last year, coking coal prices have touched $300 (free on board) a tonne under long-term contracts in the international market. Coking coal is a vital raw material in steel-making.
