Steel Companies Anticipate Improved Demand and Margins in Q3FY25

Steel companies are set for better performance in Q3FY25, driven by improved demand and stable pricing trends, according to a Centrum report. The sector is expected to benefit from the receding monsoon and a slight hike in long steel prices, while flat steel prices remain steady quarter-on-quarter (QoQ).

Additionally, coking coal costs are projected to drop by USD 25 per tonne, boosting margins for steel producers. The report highlights that these factors will likely enhance profitability in the upcoming quarter. However, it noted a QoQ rise in net debt for steel companies, averaging 6-20%, due to ongoing capital expenditure expansions.

In Q2FY25, the ferrous segment faced challenges, with domestic steel producers incurring EBITDA losses of ₹700-1,700 per tonne due to steep realization declines of ₹3,000-6,200 per tonne. Despite this, a fall in raw material costs partially offset the losses.

The non-ferrous segment performed better, supported by lower costs and an improved product mix amid declining base metal prices. Aluminium and zinc prices on the London Metal Exchange (LME) fell by 5.5% and 2% QoQ, respectively. Centrum expects non-ferrous metals to recover in Q3FY25, with aluminium and zinc prices likely to rise, driving earnings growth.

Overall, the steel industry’s recovery hinges on favorable pricing, demand improvements, and reduced input costs. Both ferrous and non-ferrous segments are poised for stronger operational performance in the coming quarter.