Steel majors take a hit in Q3 as demand dips, costs rise (Source: HBL)

Steel majors take a hit in Q3 as demand dips, costs rise

Tata Steel net halves; JSW Steel reports net loss of Rs 128 cr.

Our Bureau Mumbai, Jan. 28 Slackening demand for steel due to the economic slowdown and a sharp rise in prices of raw materials, especially coal, have made a major dent on the bottomlines of Indian steel majors.While Tata Steel, the world’s sixth largest steel maker, on Wednesday reported a nearly 56 per cent dip in its third quarter net profit, JSW Steel posted a loss during the quarter. On Tuesday, Steel Authority of India Ltd also reported a 56 per cent drop in its quarterly net profit at Rs 843 crore.Tata Steel clocked a net profit of Rs 466.24 crore during the quarter, against Rs 1,068.58 crore in the corresponding quarter of last fiscal. JSW Steel, on the other hand, reported a loss of Rs 128 crore for the quarter against a profit of Rs 328 crore in the year-ago quarter. JSW Steel said despite the intense measures to trim costs, control inventory and sharpen focus on the rural markets for value-added products, its sales realisation fell 50 per cent compared to the peak levels.
The company has put off the 10-million tonne expansion project at Vijaynagar works, along with benefication plant and power plant by six months, and it will now be commissioned in March 2011. “All other greenfield projects are currently under review and will be taken up at an appropriate time on achieving financial closure and on improvement of market conditions,” JSW Steel said.Tata Steel’s net sales too registered a decline to touch Rs 4,735.68 crore during the quarter (Rs 4,928.23 crore). The company’s steel production was nearly flat at 1.23 million tonnes (1.24 million tonnes).A sharp rise in cost of raw materials during the quarter pushed up Tata Steel’s expenditure. Its raw materials bill during the quarter was Rs 1,611.17 crore, against Rs 902.32 crore in the year-ago quarter.
Tata Steel reported a foreign exchange loss of Rs 126.80 crore for the quarter, as compared with a gain of Rs 47.92 crore in the corresponding quarter. The company’s third quarter results do not include the results of Corus, which was acquired by the Tatas in 2007 for $12.9 billion. Mr B. Muthuraman, Tata Steel’s Managing Director, felt that the demand for steel will continue to be weak in the current quarter, although there were some positive signs for the later part of the year.Steel prices would remain at current levels for the next few months, he said, adding that the current steel prices are about 50 to 60 per cent below what they were four to five months ago.Replying to a question, he said the market conditions would not impact the company’s two key projects, the expansion of its Jamshedpur plant to 10 million tonnes and the greenfield Kalinganagar (Orrissa) project. “There is no change in our schedule for commissioning the Jamshedpur expansion by April 2011,” he added.Corus, which constitutes Tata Steel’s Europe operations, is facing a 40 per cent fall in demand. “We have currently slashed production by 40 per cent in tune with the market conditions,” Mr Phillpe Varin, Corus’s CEO, said.He was not willing to predict how long the production cut will continue.