After a robust 7.5-8% growth in the last two fiscals, the domestic steel industry is expected to witness a mid-cycle slowdown to 4-5% this fiscal, according credit rating agency Crisil. The agency has attributed the growth slowdown to muted construction investment and weak automotive market.
Sales realisations will shrink 5-6% this fiscal, Crisil added. All this will be a drag on the sector’s aggregate operating profit, which is expected to fall 12-13% in fiscal 2020, according to Crisil’s estimates.
In addition to this, large brownfield expansion plans, capacity acquisitions under the National Company Law Tribunal (NCLT) process, and high leverage of global assets will weigh on return ratio in the near to medium term.
Global steel prices have declined 13% in the first eight months of 2019 due to weak demand, unseasonal jump in global inventory levels--up by about 35% through August--and trade tensions. This was despite a whopping 56% run-up in global iron ore prices during the same period, shrinking margins for producers.
0 comments:
Post a Comment