Most steel stocks have performed badly, sliding down anywhere between 16 per cent and 78 per cent since the last Budget.
Though most companies managed to grow revenues during the nine-month period ended December 2014, many saw their profits shrink or worse, incurred losses during this period.
The subdued growth in steel demand, an outcome of slowdown in economic growth, has impacted sales realisations. The threat of steel imports — which grew over 50 per cent during the nine-month period December 2014 too, has kept steel prices under check.
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Besides, steel manufacturers have also had to bear the brunt of shortage of domestic iron ore, following the mining bans imposed in some States. Companies with captive mines — Tata Steel and Steel Authority of India — too faced suspensions of mining operations in Odisha and Jharkhand.
As a result, while many companies scaled down operations, others resorted to importing iron ore. Tata Steel has been impacted by the regulatory concerns in India, its most lucrative market. The adverse impact on the company’s operational performance is reflected in the recent December quarter results. The stocks of debt-laden companies such as Bhushan Steel and Prakash Industries were hit due to the bribery scandal they were embroiled in.
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For others such as Jindal Steel and Power, de-allocation of operational coal blocks in September 2014, was the single biggest drag on the stock.
Looking forward
Among the sector’s foremost demands from the Budget is protection from steel imports through duty hikes on these products. The industry also wants the import duty on key steelmaking inputs, iron ore and coking coal and others such as manganese ore and chrome ore, to be brought down.