The Indian steel industry witnessed the green shoots of a recovery during the July-September quarter of the current year, with average industry capacity utilization surpassing the 77 percent mark prevailing in the corresponding period of the previous year, according to a report from the rating and financial services agency, ICRA.
“Due to this, the performance of steel mills, especially blast furnace operators, is expected to register a healthy rebound in the second quarter supported by rising steel prices and tepid input costs,” the ICRA report said.
“However, the overall financial performance of steel companies for fiscal 2020-21 is expected to remain subdued, given the pandemic-related disruptions suffered in the early part of the year,” ICRA stated.
“The steel industry’s average capacity utilization has rebounded from a low of 27 percent in April which suggests that the operating environment is improving. Steel markets have announced multiple hikes in recent months, whereas input costs are likely to trend lower largely due to tepid seaborne coking coal prices, and this will support a recovery in mill margins from the lows of the first quarter,” the ICRA report said.
However, the agency pointed out that the pace of recovery will be uneven between primary and secondary steel producers, with the former managing to increase market share, helping them operate at higher asset utilization levels.