Steel Authority of India Ltd. (SAIL) – India’s 2nd largest steel making company in terms of production announced its quarterly results for Q2 FY17 on 08 Dec’16. The company reported a decline in standalone net loss of INR 732 crore for Q2 FY17 against a loss of INR 1,108 crore in Q2FY16.
The steel maker recorded its best ever saleable steel sales of 3.6 MnT in Q2 FY17 which is 33% higher on yearly premises. In Q2 FY17, SAIL also recorded the highest ever Q2 saleable steel production at 3.5 MT, up by 30% Y-o-Y. The steel making company has improved efficiency by 8-10% by cutting down cost of production.
Below are the key highlights that we learnt from SAIL’s investor conference call conducted yesterday (09 Dec’16):
1. Inventories have come down significantly in this fiscal – Towards the beginning of this fiscal, SAIL’s inventory (comprising of majorly slab) was at 1.6 MnT. However presently the inventory is nearly around 0.8-0.9 MnT. Thus the company has drawn down its inventory levels significantly.
2. Coking coal prices likely to come down – Coking coal (Premium HCC, Australian origin) prices that had soared to USD 320/MT, CNF India have come down and are presently seen at USD 308/MT, CNF India. With not much trades being concluded at these high offers, prices are likely to come down in the near term. Recently the company has signed long-term contracts with Japanese suppliers at levels of USD 200/MT. Hence prices are likely to come down further in the coming term.
3. Domestic flat steel prices may increase further – Major Indian steelmakers had raised flat products prices by INR 3,000/MT and long products prices by INR 1,000-1,500/MT w.e.f. 01 Dec’16. The price hike has been absorbed by the market and it is expected that comparatively higher cost of imported flat products may give room to Indian steel makers to further increase prices by about INR 2,000-3,000/MT.
However in case of long steel products anticipated price hike in the coming term is of INR 1,500-2,000/MT.
4. Impact of demonetization on Indian steel industry – India’s secondary steel market was hit more badly after currency demonetization. Many players in secondary market were reported to have cut production while some have closed down operations over cash crunch.
5. High export potential – There are high export potential for markets of Middle East and South East Asia. Apart from meeting demand in domestic market, SAIL is bullish on exploring export options. The company exported 0.45 MnT finished steel in H1 FY17. It is to be noted that presently Indian steel products are getting better response in global market as many countries have imposed anti-dumping duties from other nations (primarily China, Japan & South Korea). Also recent Rupee depreciation will also boost exports from India.
6. Expect provisional Anti Dumping duty to become constant – Indian govt. has imposed provisional Anti Dumping duty and decided Non Injurious price (NIP) for HRC at USD 474/MT. Thus, goods can not be imported below NIP. SAIL expects that there are chances of Anti Dumping duty made permanent and the NIP will be greater than the present level of USD 474/MT.
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