JSW Steel To Tata Steel Stare At Margin Squeeze As Prices Slump

A 15% export duty on steel is also likely to further drag down an oversupplied domestic market. Analysts, including at JPMorgan and Jefferies, termed it as “negative” for the sector. Jindal Steel & Power Ltd. said the levy “will not be competitive” even as it sees the move as “temporary” and expects “things to be normalised” by July.

Still, the levy will eventually hurt the mills’ margin.

Indian steel producers are “staring at a sharp correction in margin in the first half of FY23 led by a combination of weak regional prices as Covid-led lockdowns in China impacted demand more than supply, stubbornly high coking coal prices, lower steel realisation led by weaker export prices, lower domestic prices on demand weakness and imposition of export duty on steel”, Kotak Securities said in a report.

Seshagiri Rao, joint managing director at JSW Steel, told BQ Prime that on one hand coking coal prices have been rising and on the other realisations have been shrinking. This might have a bearing on the margin.

TV Narendran, managing director at Tata Steel, sees that as an even bigger concern than export duty. Coking coal prices are still over $500 a tonne, he told BQ Prime in Davos. “It doesn’t show any sign of coming down in a hurry and that’s a concern, because that’s a huge input cost for us.”