Posted on 20 Feb 2025
Morning Brief: Indian tier-1 mills posted mixed results in October-December 2024 Q3FY'25. While production volumes fluctuated q-o-q, sales increased. However, all companies except Tata Steel recorded lower EBITDA/tonne (t) q-o-q, with steel prices remaining depressed. BigMint goes behind the scenes.
Production shows mixed trends
JSW Steel emerged as the leading producer in Q3FY'25, with volumes down q-o-q by a minuscule amount. The other four leaders integrated steel majors - Tata Steel, Steel Authority of India Limited (SAIL), ArcelorMittal Nippon Steel (AM/NS) India, and Jindal Steel and Power (JSP) - showcased mixed trends.
JSW Steel (standalone) recorded an output of 5.7 million tonnes (mnt) in Q3, reflecting a marginal drop of 1.2% q-o-q and 0.3% y-o-y. Volumes were impacted by a temporary maintenance shutdown of a BF in Dolvi, but besides that, capacity utilisation at the company's Indian operations was robust, at 91% in Q3.
Tata Steel's output was at 5.69 mnt in Q3, higher by 7.8% q-o-q and 6.4% y-o-y, fuelled by an increase in production capacity. The company has commissioned a new blast furnace at Kalinganagar, able to churn out 5 milliion tonnes per annum (mnt/year); this is currently operating at 8,500 tonnes per day (tpd) and produced 0.56 mnt during the quarter.
SAIL recorded production of 4.63 mnt, down 3.1% q-o-q and 2.5% y-o-y, while AM/NS India's output increased by 11.9% q-o-q but fell 0.7% y-o-y to 1.95 mnt.
Meanwhile, JSP was able to lift its production by 1% q-o-q and 2.6% y-o-y to 1.99 mnt.
Sales pick up on improved consumption
Sales increased across companies in Q3, both on a q-o-q and y-o-y basis, possibly as the import pressure on the Indian market diminished, and steel consumption improved.
JSW Steel's sales increased by 5.5% q-o-q and 7.5% y-o-y to 5.59 mnt in Q3 on the back of strong domestic procurement. Exports constituted 8% of the company's sales during this quarter.
Tata Steel's sales rose 3.5% q-o-q and 8.4% y-o-y to 5.29 mnt in Q3, the best Q3 performance for the company. Steady domestic deliveries and an impressive export performance helped Tata Steel lift its sales volumes. Notably, exports surged 104% q-o-q to 0.47 mnt in Q3.
Similarly, SAIL reported strong sales performance of 4.43 mnt, reflecting an increase of 8% q-o-q and 16.6% y-o-y.
AM/NS India also recorded higher steel shipments in Q3. The volume increased by 13.3% q-o-q and 14.5% y-o-y to 2.138 mnt.
JSP's volumes also edged up, by 2.7% q-o-q and 5% y-o-y to 1.9 mnt.
EBITDA falls amid subdued market conditions
Amid the ongoing slump in the steel market, EBITDA/t declined q-o-q for all companies except Tata Steel. Notably, EBITDA/t showed a downtrend across the board y-o-y, and for all companies barring SAIL, the y-o-y drop was higher than the q-o-q one.
JSW Steel's EBITDA/t declined by 12% q-o-q and 31% y-o-y to INR 7,710/t.
Tata Steel's increased by 8% q-o-q but fell 16% y-o-y to INR 14,200/t. The y-o-y decline can be attributed to softening steel prices, while the q-o-q improvement could have resulted from a greater focus on operational efficiency and domestic deliveries.
SAIL's EBITDA/t eroded by 30% q-o-q and 11% y-o-y to INR 5,390/t. The same for JSP stood at INR 11,200/t, reflecting a decline of 2% q-o-q and a significant 28% y-o-y.
Meanwhile, AM/NS India's EBITDA during Q3 declined by 18.1% to $133 million from $162 million in the previous quarter. The company attributed the fall to a negative price-cost effect, which stemmed from lower steel prices, though this was partially compensated by higher sales.
Notably, finished steel prices showed mixed movements q-o-q, though they headed south y-o-y. To illustrate, BF rebar (12-32 mm, Fe 500D) prices moved up by 4.8% q-o-q, to a quarterly average of INR 53,700/t exy-Mumbai in Q3, as per BigMint data. However, tags were lower by 3.4% y-o-y.
Conversely, hot-rolled coil (HRC, 2.5 mm, IS2062, Gr-E250) prices decreased by 5.5% q-o-q, settling at INR 47,707/t in Q3. A steeper drop of 14.9% occurred y-o-y.
Additionally, iron ore fines prices surged by 21% q-o-q to INR 5,315/t, elevating production costs but most likely squeezing margins, as finished tags did not rise by a similar quantum.
Outlook
Q4 is generally a strong quarter for steelmakers, with companies recording a spike in production and sales. This trend is expected to continue. However, with the steel market downtrend sustaining for a protracted period, given persistent oversupply, rumours are swirling that certain Indian mills will be undertaking maintenance shutdowns this month. In fact, JSW Vijayanagar's HSM2 and AM/NS India's Corex-2 plant have been taken offline. This factor may contribute to muted volumes or a minimal rise.
That said, the likely implementation of a safeguard duty to arrest rising steel dumping into India is likely to lift market sentiments in the remainder of Q4 and is expected to boost steel prices and realisations of the primary mills.
Source:BigMint
