Steel producers brace for profit pressure as prices stay weak in December quarter

Indian steel producers are likely to report a sequential decline in profits for the December quarter, as sustained weakness in steel prices and rising input costs compress margins across the sector. Analysts note that the pressure comes despite the September quarter traditionally being the weakest due to monsoon-related disruptions to demand and pricing.

Steel prices, instead of stabilising after the monsoon, corrected further in the October to December period. Average prices of flat steel products declined by about 4 to 5 percent quarter on quarter, while long product prices fell by around 1 to 2 percent. This continued softness has directly impacted realisations for producers at a time when costs remain elevated.

According to estimates, blended realisations for steel companies are expected to decline by roughly Rs 1,500 to Rs 3,500 per tonne compared with the September quarter. At the same time, the cost of key raw materials such as coking coal has increased, further squeezing profitability. Analysts believe this combination will significantly affect operating performance during the quarter.

As a result, earnings before interest, tax, depreciation and amortisation per tonne are projected to fall by around Rs 1,000 to Rs 2,400. Brokerage firm Nuvama Institutional Equities said in a pre earnings note that EBITDA for most steel companies could decline between 10 and 21 percent on a quarter on quarter basis, largely due to lower steel prices.

Net profit is also expected to remain under pressure. Market estimates suggest that December quarter net profit could fall by 10 to 40 percent sequentially, with public sector major Steel Authority of India likely to face the sharpest impact. Private sector producers are also expected to see weaker earnings, though diversified product portfolios and cost controls may provide some cushion.

While demand from infrastructure and construction remains steady, analysts believe a meaningful recovery in profitability will depend on a sustained improvement in steel prices and moderation in raw material costs. Until then, the near term outlook for steel producers is expected to remain cautious, with earnings visibility continuing to be shaped by global price trends and domestic cost dynamics.