After 13 years, Steel Authority of India (SAIL) is likely to report losses for 2015-16, as steel prices continue to decline. Over the past one year prices of HR coils have fallen by nearly 40% to $388 per tonne and consequently the company’s realisations have dropped 24% in Q2FY16 from a year ago. As such SAIL reported losses in Q2FY16 of R1,056.96 crore.
Industry watchers expect prices could fall further. Accroding to a HSBC Securities and Capital Markets (India) report, demand scenario of steel has not yet improved much, with cheap imports from China continuing despite the fact that safeguard duty have been imposed; India in September announced a provisional safeguard duty of 2% for some categories of steel for 200 days.
SAIL’s financial performance has suffered mainly due to lower sales realisation which dropped 24% in Q2FY16, and a decline in sales by 6.7% from a year ago.
“Domestic prices have registered a steep decline due to impact of lower priced steel imports especially from China, Japan, Korea and CIS countries. Domestic and International steel market continues to pose challenges to the Indian steel makers. The imposition of safeguard duty has given some relief to the industry, however, the industry will have to bear with low cost imports for some more time,” said secretary, ministry of micro small and medium enterprise (MSME) and chairman SAIL, AK Pujari, post the earnings announcement in the second quarter.
SAIL has reported saleable steel volume of 2.7 million tonnes in Q2, lowest in the last two years.
Motilal Oswal estimates steel companies will continue to fare badly for another six months. SAIL is expected to report an adjusted loss of R3,302.7 crore in FY16 compared with a net profit of R2092.68 crore posted in FY15.
JSW steel is expected to report adjusted profit of R347.9 crore against profit of R2,166.48 crore a year ago and Tata Steel is expected to report adjusted profit of R921.7 crore against profit of R6439.12 crore a year ago.