Wednesday, July 6,
Higher coking coal prices will continue to exert pressure on steel maker’s profit margin over the next two quarters.
Coking coal is a key ingredient for making steel .India’s biggest steelmaking companies like SAIL and Tata steel import coking coal to meet their requirement; mainly they import coal from Australia. Australian coking coal price is high due to flood that choked the supplies; however, the shortage in supplies is expected to continue if the ongoing strike at BHP Billiton (The world largest coking coal producer) continues further.
Steel makers said they paid as high as $300 a ton for imported coking coal in the quarter ended June. The benchmarks of coking coal contracts for September quarter was negotiated at $315 a ton marginally higher than the previous quarter.
Mr Bhavesh Chauhan, analyst at Angel Broking expects the operating margins of various steel firms to contract by 300 to 370 basis points year-on-year in the June quarter. This margin contraction mainly due to the high raw material costs and the impact of higher raw materials will be felt in next two quarter. According to analyst the operating margins of steel companies have seen a sequential decline in major part of the last financial year and decline in operating margin will be worsen in July-August- September quarter.
Source: Business line
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