Source: Scrap Monster
The operating profits of major steel players in the country are likely to see huge drop during the current fiscal year, said the latest market forecast report published by India Ratings (IndRa).
The EBITDA of steel makers are projected to witness 20-30% decline in FY21, primarily due to fall in demand and price realization. The sector was badly impacted by halt in construction activities due to the extended lockdown. The onset of monsoon and shortage of workforce due to mass migration of labourers are likely to impact steel manufacturing activities in the country.
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The frontline steel manufacturers are expected to bottom out during H1 FY21, due to lockdown disruptions in Q1 and seasonally weak Q2. The credit metrics of the country’s steel players are expected to take a hit. IndRa expects complete recovery only during the second half of FY 22. It must be noted that the agency had earlier predicted 10-15-% decline in steel demand for the current fiscal.
Also, it expects correction in steel prices and huge building up of inventories over the fiscal. However, there may be intermediary periods when prices may receive support due to low production levels.
The flat products segment is likely to be more impacted than the long products segment, the agency noted.