Steel prices slid by nearly six per cent in most grades, squeezing sales margins of steel producers more drastically than last year. During the 1997-98 fiscal, most steel makers had shown a drastic dip in profitability, but this year, most of them will be in the red.

Hot rolled coils prices are 5.7 per cent lower this month at Rs 14,300 a tonne than in March 1998, despite the Rs 800 a tonne increase in sales realisations last month. Prices of galvanised steel products, which are the most value-added segment of the market, declined by 7.89 per cent during the year.

Galvanised sheets, coils and plates are essentially bought by white goods manufacturers and makers of electrical appliances. The average price of the product slid from Rs 22,800 a tonne lastyear to roughly Rs 21,000 a tonne during this year.

The unyielding GP/GC steel prices actually blew up into a row between cold rolled steel makers and hot rolled steel makers, since the cold rolling mills could not pass on the HR steel price hikes to the end users.

Long products, used mostly by the construction sector, sold at slightly lower prices this year than last year, but the realisations per tonne were better than for the more value-added flat steels. Since all self-respecting steel companies make more flats than longs, the 5.7 per cent to 7.89 per cent drop in flat steel prices is bound to take a heavy toll over the industry this year.

At profit declaring time, Tata Steel may have happier tidings than other companies. Its balance sheet should account for some of the sales of assets, like two old rolling mills, steel melting shop number three and its 40 per cent stake in Tata Timken, to cushion off the impact of the low sales realisations.

Other steelmakers, like the Steel Authority of IndiaLimited (SAIL), Essar Steel and Lloyds are destined to post losses. The import floor prices of steel should improve SAIL's earnings by Rs 80 crore. Even so, its Rs 890 crore of losses in the third quarter are likely to become nearly Rs 1100 crore of losses by March 31.

Essar Steel's losses were Rs 226 crore by December end and should be worse and Lloyds, which had Rs 58 crore of losses in 1997-98, should end the year in the red as well. The profits of Ispat Industries should dip by more than 55 per cent, from Rs 55 crore last year.

Jindal Iron and Steel Company's (Jisco) profit should be considerably less than Rs 30 crore last year too, even though group flagship, Jindal Strips, could remain better off, because of its niche market in stainless steels.The drop in profits is the inevitable result of an almost stagnant demand for steel within the country.

The demand for steel this year was estimated to be 22.66 million tonne, which is almost the same as last year's projected consumption of 22.63 milliontonne. In 1996-97 the apparent consumption of finished steel within the country (computed by subtracting exports from domestic output and imports) was 22.12 million tonne.

Steel producers, aware of the recession in demand at home and overseas, lobbied for a tariff measure to block cheap imports and were granted an import floor price for seven grades of steel. The steel ministry estimates that the slight upward movement in steel prices at home, should improve the cumulative sales of steel makers by Rs 100 crore.

But the steel industry needs more than that to be able to cover the escalated costs of its inputs and still make some money.