New Delhi [India], November 25 : Steel companies in the country are likely to face margin pressure in the third quarter of FY25 as muted steel prices compress spreads, according to a report by Axis Securities.
The report stated that the weak demand in China and higher exports from the country have been identified as key factors behind the decline in steel prices.
The report highlighted that Chinese steel exports reached 92 million tonnes per annum (MTPA) between January and October 2024, marking a 22 per cent year-on-year increase. This has led to an oversupply in the global market, weighing down prices domestically.
It said "Weak Chinese domestic demand along with higher Chinese exports has led to a decline in steel prices in India. Chinese steel exports from Jan'24 to Oct'24 stood at 92 MTPA, up 22 per cent YoY"
In India, the average price of hot-rolled coil (HRC) steel in the trader's market in Mumbai fell by 8 per cent year-on-year and 6 per cent quarter-on-quarter to Rs 51,802 per tonne in the second quarter of FY25. Spot prices have further declined to Rs 49,000 per tonne, 5 per cent lower than the Q2FY25 average.
The report also noted some signs of recovery in China's residential property sector, with increased transactions in major cities following policy measures aimed at boosting demand.
However, challenges remain, as the three-month moving average of year-to-date floor space declined by 19 per cent year-on-year in September 2024, remaining in negative territory.
It said "China's residential property sector is showing some signs of improvement with the transactions in major cities rising after recent policy measures introduced to boost demand".
On the global front, the report noted that the probability of a 25-basis point rate cut by the US Federal Reserve in its December 2024 meeting has fallen to 58.9 per cent, down from 76.8 per cent in October 2024, owing to strong economic data from the US.
Additionally, China has removed a 13 per cent export rebate on aluminum and copper, effective December 1, 2024, in response to anticipated tariff measures by the new US administration.
These developments highlight the ongoing challenges and potential shifts in the global and domestic steel and metals markets.
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