Decline in steel prices to impact operating profit of major domestic steel producers: Crisil

Declining steel prices will affect the operating profit of major steel producers in the domestic market, Crisil Ratings said on Thursday.

The original metal that is produced from steel is called primary metal.

Despite increased sales volume and lower cost pressures, mainly due to lower coking coal prices, the operating profit margin will remain at 15-16 percent in the current financial year, it said.

“Lower realizations and lower operating margin may drag overall Ebitda for major steelmakers down by 5-7%, at a time of high growth,” said Crisil Ratings Director Ankit Hakhu.

Domestic prices of iron ore are likely to fall by 10 percent on average this currency from Rs 57,500 per tonne in the last currency. The first half of this fiscal has already seen average domestic steel prices fall by eight percent from last fiscal’s average.

While domestic demand is healthy, global steel demand is likely to enter a third consecutive currency contraction. This is leading to an increase in imports — particularly from China, where demand remains muted — which is depressing.