CRISIL Foresees Dip in Steel Firms’ Margins During FY21

SEATTLE (Scrap Monster): The ratings agency, Crisil, stated that operating margins of domestic steelmakers are likely to witness decline in FY21. However, it predicts a better position, compared with the downturn witnessed during fiscal 2016.

According to the report, the operating margins of Indian primary steel producers are likely to drop by 2% to 15%, primarily due to weaker volumes and realizations. The operating margins had recorded downfall of 4% in fiscal 2020 to 17%, falling from the peak of 21% in FY19. It must be noted that FY16 had reported the lowest level of 9%, during which the sector had witnessed significant slowdown in operations.

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Crisil: Indian Steel Demand May Not Recover Until Q3 This Fiscal

Crisil foresees pickup in demand for steel during the remaining period of the current fiscal year. However, it would be insufficient to cover the drastic demand decline witnessed during the initial quarter of the fiscal. The anticipated increased government spending on rural housing and infrastructure coupled with recovery in automobile industry are likely to act as key triggers for steel demand growth. The pace of recovery and its impact on steel prices are to be closely monitored, the report said.

The domestic steelmakers are feared to defer at least 50% of their planned capital investments during the current fiscal. Consequently, the companies are likely to report stable gross debt figures.