[Ferro-Alloys.com] Indian steel-companies' like Tata Steel and JSW Steel will see a decline in profitability mainly due to slowing demand growth from the auto sector and higher raw material costs, Moody's has said in its latest report.
Tata Steel's earning before interest taxes depreciation and amortization (EBITDA) per tonne in its Indian operations will likely decrease in the 12 months to June 2020. However, at more than $200 per tonne, its profitability will continue to be the highest among rated Asian steel producers.
JSW Steel's EBITDA per tonne will decline by around 13% and remain lower than Tata Steel's Indian operations, largely because of elevated raw material prices and the company's relatively limited backward integration, the report said.
"Nonetheless, the two Indian steel companies will benefit from rising steel production on the back of continued demand growth," it added.
India will remain the world's second-largest steel producer behind China after having overtaken Japan in 2018. New capacity additions in India will be limited over the next 12 months but domestic production will increase to meet demand growth. Consolidation in the Indian steel sector that began in 2018 will continue in 2019, with five stressed steel companies accounting for 20% of the country's steel-producing capacity operating under new ownership.
"This will lead to an improvement in India's capacity utilization to 85% over the next two years from less than 78% in the 12 months to June 2019," Moody's pointed out. Slowing but still healthy domestic demand and limited capacity additions will help keep steel prices largely stable over the next 12-18 months, it added.（economictimes.indiatimes）