Global firm Nomura expects Indian steel companies to see improved June-quarter profits as rising steel prices outpace raw material costs. Despite recent share price declines, the brokerage anticipates domestic volume growth of 5-6% year-on-year for the industry. Investors may monitor whether companies can sustain these margins amid fluctuating coking coal and iron ore expenses.
Indian steel producers are facing a mixed market environment this week, with shares of major companies like Tata Steel and JSW Steel seeing selling pressure in early trade. Despite this short-term dip, Nomura has issued a positive forecast for the sector, highlighting the potential for better profit margins in the June quarter.
Price Realizations and Profitability
The core of this optimistic view is the recent trend in domestic hot-rolled coil (HRC) prices, which have risen by approximately Rs 4,800 per tonne compared to the previous quarter. For steel manufacturers, this higher selling price is a key factor in offsetting the rising costs of essential raw materials such as coking coal and iron ore. Nomura anticipates that these firms will see an average sequential increase of about Rs 1,000 in consolidated EBITDA per tonne, a metric that measures operational profitability before accounting for interest, taxes, and depreciation.
Volume Growth and Regional Performance
Beyond pricing, domestic demand remains a focal point for the industry. The sector is expected to record a 5-6% year-on-year growth in domestic sales volumes. Jindal Steel is projected to lead the pack with a 13% increase in volume, while JSW Steel is expected to see a 6% rise. For Tata Steel, the outlook for its domestic business is favorable, with expectations of a Rs 2,000 per tonne improvement in EBITDA. However, the company continues to face challenges in its European operations, which are expected to remain in a loss-making position. Nomura estimates Tata Steel’s consolidated EBITDA for the quarter to reach Rs 90 billion, down slightly from the Rs 98 billion reported in the March quarter.
Investor Monitorables
The steel sector is highly sensitive to the balance between domestic demand and the volatility of input costs. While current projections suggest that Indian steel makers have enough pricing power to maintain or improve their profit margins, actual results will depend on how sustained the current HRC price levels remain throughout the year. Investors may track upcoming quarterly results to see if these volume growth projections translate into actual cash flow and if European operations show any signs of recovery. Given the capital-intensive nature of this industry, monitoring debt levels alongside these margin trends remains important for assessing long-term stability, especially if raw material costs rise faster than the finished steel prices.