Analysts see tough time for Tata Steel, SAIL

 Steel prices are likely to continue to cool down over the next one year, thanks to a continuing slump in consumption and high inventory levels.

 Unabated growth in global supply with rising production in China, and lessening supply disruptions in other regions are also likely to reduce steel prices, they added.

 In a research note to institutional clients, research firm Brics Securities said that the steel players' earnings are likely to remain dependent on steel prices in the medium term with little prospects left for earnings improvement from factors like product mix or cost reduction.

 Tata Steel and SAIL are also unlikely to witness any major volume growth in the near future, the note added.

 Tata Steel is already one of the lowest-cost steel makers, and further gains from efficiency are not expected, it added.

 The company has also embarked upon a major capacity expansion plan, which might lead to further dilution in the near-term return for shareholders, analysts said.

 SAIL, despite its cost advantage from captive resources, is not among the country's most competitive steel producers due to its "outdated technology, huge workforce and high proportion of commodity grade products."