Steel stocks fall up to 1.6% as JM Financial expects Q2 earnings of steel companies to be subdued

Steel stocks fall up to 1.7% as JM Financial expects Q2 earnings of steel companies to be subdued

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

live

• bselive
• nselive

Volume

Todays L/H

More

×

Steel stocks were trading in red on September 12 after domestic brokerage JM Financial Securities said it expects Q2 results of steel companies to be subdued.

At 1:20 pm on September 12, Jindal Stainless and Jindal Steel & Power stocks were trading 1.6% and 0.91% lower, respectively.

JSW Steel shares were trading 0.2% lower.

Indian steel companies are expected to post muted results for the September quarter, mainly due to lower steel prices, increased Chinese exports, and seasonal challenges, according to a report by JM Financial Securities. These factors are likely to impact both revenue and overall performance.

During the September quarter, domestic hot-rolled coil prices dropped by Rs 2,000 per tonne, while long steel products saw a steeper decline of Rs 7,000 per tonne. These price reductions are likely to negatively affect company earnings. JM Financial estimates that ferrous companies will see a drop of about Rs 3,500 per tonne in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) during the quarter. In addition to falling prices, sales volumes are also expected to be lower due to seasonal weakness.

On the positive side, steel producers might benefit from a decrease in coking coal prices, which are expected to fall by $5–$10 per tonne. Coking coal is a key raw material for steel production.

Looking ahead, JM Financial anticipates a recovery in steel prices in the second half of the fiscal year as demand picks up. Recent gains in hot-rolled coil prices in China could also influence Indian prices, especially since China has announced plans to reduce domestic steel production — a move that could help support global prices if effectively implemented.

From October to March, steel demand in India is likely to strengthen due to seasonal trends. JM Financial also expects the government to address gaps in the existing 12% safeguard duty on steel imports. Additionally, steel companies could benefit if the government approves the Directorate General of Trade Remedies’ proposal to extend the safeguard duty for another three years.

"We anticipate a jump in 2H spreads driven by a) $20/tn rebound in China domestic HRC prices in 2Q compared to 1Q, b) Indian government plugging loopholes in safeguard duty, c) increased visibility on import duty from 200 days to 3 years, and d) 2H being a seasonally strong period consumption-wise. Non-ferrous India business is expected to witness margin expansion in 2Q with average LME Aluminium at $2.6k/tn, up $140/tn compared to 1Q. JSPL (lowest leverage, highest volume growth over the next few years), Hindalco (non-ferrous) and TATA remain our top picks in the metals space," JM Financial in a note.