The domestic steel players producing steel through the blast furnace route stand to benefit from the continuing weakness in the international coking coal prices, but iron ore continues to play spoilsport for the Indian steel industry, rating agency ICRA has said.
"We expect the domestic players producing steel through the blast furnace route to benefit from the continuing weakness in international coking coal prices, a trend which has already been observed in the financial results posted by a number of companies in the first quarter of 2014-15," it said.
Coking coal prices have declined by around 16 per cent in the first quarter of 2014-15 (Q1FY15) over the previous quarter, and the same contract prices have been rolled over in Q2FY15. This followed a 13 per cent decline in coking coal prices over the whole of FY'14.
"With the exchange rate remaining largely stable in FY'15 till date, the price decline has provided a relief to the blast furnace operators in the country, which import coking coal for producing steel," ICRA Senior Vice-President and Co-Head (Corporate Sector Ratings) Jayanta Roy said.
Domestic iron ore production, however, continues to suffer in spite of the lifting of bans from mines in Karnataka and Goa. The continuing short supply situation in the country has been further aggravated by the recent closure of iron ore mines in Odisha, although temporarily.
While some of the mines, which were initially under the purview of this ban, have been allowed to commence operation subsequently, production is yet to resume at the other merchant mines, which had accounted for around 15-20 million tonnes of iron ore production in FY14 in the state.
