Fall In Deliveries Masks Stronger Rebound For Steelmakers In Q3

Steelmakers' output has reached the pre-pandemic levels as demand continues to recover along with the economy.

Most players reported production close to or higher than levels seen a year earlier in the quarter ended December. While deliveries contracted for some, it was largely because the inventory was exhausted in the previous quarter and output couldn’t keep up with consumption.

The sector has emerged from the disruption caused by Covid 19. The comes as India has largely reopened its economy after one of the world’s strictest lockdowns earlier in the year. And demand from automakers to infrastructure and construction projects returned.

Production

Barring Tata Steel Ltd., others saw output grow sequentially in the quarter ended December. For Tata Steel, planned maintenance shutdown impacted production.

The Steel Authority of India outperformed peers over the preceding quarter. The company has gradually scaled up the performance by enhancing the volumes which have now reached pre-Covid levels, Soma Mondal, chairman of SAIL, said in a statement. “The consistent growth reflects that SAIL is poised to grow steadily in future. The domestic steel consumption has a positive outlook as the economy is reviving and all sectors have started to pick-up.”

Jindal Steel and Power Ltd. saw the highest growth over a year earlier.

Deliveries

Sales declined sequentially for all steelmakers barring SAIL that saw a marginal growth.

Deliveries contracted for Tata Steel and JSW Steel over a year earlier as well largely because of a higher base, said Amit Dixit, assistant vice president, research, Edelweiss Securities. However, if read in continuity, this is line with expectations, he said. “Overall domestic sales have gone up for all the steel companies as they concentrate on domestic market.”

Tata Steel said in its statements that domestic sales volumes were constrained in the third quarter because of lower opening inventory after very strong sales in the second quarter. As a result, deliveries stood at 4.66 million tonnes in the third quarter, falling 8% sequentially.

Vishal Chandok, analyst at Emkay Global Financial Service, cited the same reason.

SAIL and JSPL registered growth over a year earlier as capacity expansion helped them meet higher demand.