The Indian steel industry is expected to witness a significant surge in net profit in the March quarter, driven by strong seasonality, easing raw material costs, and the government’s safeguard duty on steel imports. Despite a decline in profits on a year-over-year basis, companies such as JSW Steel, Tata Steel, Jindal Steel and Power, and Steel Authority of India (SAIL) are likely to post a 9% to 700% increase in net profits compared to the December quarter.
The increase in prices of hot rolled coils (HRC) and cold rolled coils (CRC) is expected to be a key driver of this growth. After seven consecutive quarters of decline, HRC prices rose by around 2% in the March quarter, while CRC prices increased by 1% after four quarters of decline. The state-owned SAIL is likely to record the sharpest profit growth on a sequential basis, driven by its outperformance in volume growth.
The industry’s volume growth is expected to be in the range of 2-20% on a sequential basis, with consolidated volumes for the four listed tier-I steel mills surpassing 21.5 million tonnes in the March quarter and 81.5 million tonnes for FY25. The moderation in iron ore and coal prices, key raw materials in steel production, is also expected to contribute to the industry’s growth. Iron ore prices have fallen by an average of ₹200 per tonne, while coking coal prices have declined by $10-$15 per tonne, close to its lowest level in four years.
As a result, operating profits of steelmakers are expected to increase by ₹1,200-1,800 per tonne for each tonne of steel produced. The March quarter is typically the strongest for steelmakers in terms of prices and demand, and the industry is expected to benefit from this seasonality. However, on a year-over-year basis, profits are likely to decline due to the impact of cheaper imports on steel prices. Despite this, the industry’s prospects are expected to improve in the coming quarter, driven by improving prices and lower costs.