India's Steel Sector to Witness Higher Gross Spreads

SEATTLE (Scrap Monster): The India Ratings and Research (Ind-Ra), in its latest report, states that domestic Indian steel sector is likely to witness higher gross spreads in H2 FY20. It must be noted that the gross spreads of hot-rolled coil products had recorded notable surge by mid-December last year, mainly due to increased steel realizations and falling coking coal prices.

According to Ind-Ra, the domestic steel demand which showed signs of improvement in the third quarter of the fiscal, is likely to further improve in Q4 FY20. However, it warns of likely disruptions in supply of iron ore, in the event of delay in the auction of iron ore mines. The domestic steel players are likely to boost production levels, in order to take best advantage of the elevated gross spreads. Consequently, the steel inventory levels are expected to close the fiscal on a higher note.

Ind-Ra states that domestic steel consumption will see improvement, especially on the back of increased construction activities. However, the demand levels in H2 FY20 are likely to be lower when compared with H2 FY19.

Further, Ind-Ra notes that the government is likely to introduce a white paper on steel sector soon, aimed at making domestic steel players more cost-competitive.