CLSA Foresees Decade-High Margins for Steel and Metal Companies

SEATTLE (Scrap Monster): Leading investment group CLSA expects steel mills and metal companies in India to report robust EBITDA rise in the last quarter of 2020. The agency shares better Q4 outlook, with Tata Steel and Hindalco likely to emerge as the top performers.

The CLSA report says that steel prices, which had started to rebound in June 2020, gained further strength through the second half of 2020. This will likely drive earnings for these companies during the third quarter. Higher steel prices are expected to result in decade-high profitability in Q4. The overall EBITDA is likely to surge higher by 14-15% over the previous year.

CLSA forecasts strong Q4 margins for Tata Steel. The company has been reporting huge demand growth in domestic market, which is evident from the drop in share of exports in overall sales from 24% in Q2 to 11% in Q3. As for Hindalco, CLSA expects strong profitability, driven by resilient spreads and robust auto sheet business. In addition, higher aluminum prices will drive domestic aluminum profitability.

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According to official data, domestic steel consumption surged 6% during Q4 this year. At the same time, exports registered significant decline during the quarter.