Ukraine war dims the sheen on steel

But strong domestic demand and cooling raw material prices encourage manufacturers to stay the course on capex plans

- ISHITA AYAN DUTT

Steel is a volatile industry So somebody who enters the business must have nerves of steel," said Sajjan Jindal, chairman and managing director of JSW Group, at a recent event in Kolkata, with a hint of a smile.

Jindal, who can be counted among one of India's most successful entrepreneurs, knows all too well about the ups and downs of steel. After all, the flagship company of his $22-billion empire, JSW Steel, just posted a consolidated net loss of ₹848 crore in Q2FY23 after amassing a record profit of ₹220,665 crore in FY22.

But even for a business leader like Jindal who in the early days of his entrepreneurial journey saw his company fall into a debt trap and then slowly transformed it into India's largest steel maker-the recent wild swing in fortune would require some nerves to withstand.

Steel prices tumbled globally after scaling peak levels in April in the aftermath of the Russia-Ukraine war and it's reflecting on the bottom line of companies.

Tata Steel recorded an 87.3 per cent fall in net profit at ₹1,514 crore in the July-September quarter as net realisations dropped across geographies. In FY22, the company's profits had soared to ₹40,154 crore.

The September quarter numbers of other top producers - Steel Authority of India Ltd (SAIL), Jindal Steel and Power, ArcelorMittal Nippon Steel India (AM/NS India) - are yet to be announced. But the margin contraction is expected to up on all 1 companies in varying degrees.

Manish Gupta, senior director, CRISIL Ratings, said the first quarter of the fiscal witnessed significant decline in steel prices with high input costs. "Though input prices have witnessed significant correction, its impact was felt only towards the end of the second quarter, leading to subdued operating margins in the first half." It was expected to be 14-16 per cent in H1FY23, against more than 20 per cent in Q4FY22, he added.