Indian primary mills see sales dip in Q3

• Crude steel production rises q-o-q
  
  
• Challenging global economic scenario impacts topline q-o-q
  
  
• Export duty takes toll on sales
  
  

Morning Brief: The challenging geopolitical and global economic scenario had its impact on steel prices in the third quarter (October-December, 2022) of financial year 2022-23 (FY23) which affected margins of the steelmakers, especially at the beginning of the quarter. The slowdown in demand in Europe and recession worries affected steel prices. That apart, the 15% export duty continued to impact export sales till November last year. On a y-o-y basis, all the large mills showed a drop in standalone profit after tax (PAT) while the y-o-y EBIDTA also declined. Unlike in the previous quarter, crude steel production was up as domestic demand as well as prices picked up towards the year-end. SteelMint explores:

Crude steel production
Most of the mills saw normalization of crude steel production in Q3.

SAIL: This public sector behemoth reported crude steel production at 4.71 million tonnes (mnt) in Q3FY2022-23 (Q3FY23), its best-ever on a quarterly basis. Q-o-q, crude steel output was up 9% against 4.30 mnt in Q2FY23 and y-o-y up 4% against 4.53 mnt in the year-ago period. SAIL set a target of 17-17.5 mnt of crude steel production for FY23.

Tata Steel: This steel major's crude steel production inched up 3% q-o-q to 4.77 mnt in Q3FY23 as against 4.64 mnt in Q2FY23. However, production was down 1% compared to 4.81 mnt y-o-y in Q3FY22.

JSW Steel: Crude steel production of this integrated major in Q3FY23 was up 7% q-o-q to 5.32 mnt, compared to 4.95 mnt in Q2FY23 and up a more substantial 21% y-o-y from 4.41 mnt in Q3FY22.

JSPL: Private steel major Jindal Steel and Power Limited (JSPL) recorded Q3FY23 crude steel production at 2.06 mnt, up 13% q-o-q compared to 1.82 mnt in the previous quarter. Y-o-y, Q3 production rose 5% against 1.96 mnt in Q3FY22.

*AM/NS India: Integrated steelmaker ArcelorMittal Nippon Steel (AM/NS) India recorded crude steel production of 1.62 mnt in Q3FY23 - down 3% on a q-o-q basis against 1.66 mnt in Q2FY23. The same was down 12% y-o-y against 1.85 mnt seen in Q3FY22.

Sales
Sales were hit q-o-q amid the export duty challenge and subdued global demand.

SAIL: The company's sales for Q3FY23 dipped 1% q-o-q to 4.15 mnt against 4.21 mnt in Q2. However, sales showed an 8% y-o-y increase against 3.84 mnt in Q3FY22 amid decent domestic demand pull.

Tata Steel: The steel major reported an almost 4% q-o-q dip in sales at 4.59 mnt in Q3FY23 compared to 4.76 mnt in Q2FY23. Y-o-y, Q3 sales were up 4% compared to 4.42 mnt in Q3FY22. "Global steel prices have witnessed steady moderation amidst inflationary pressures and concerns about economic slowdown in the first nine months of the financial year. In India, steel prices were subdued even as raw material costs moved lower," said Koushik Chatterjee, Executive Director & Chief Financial Officer at Tata Steel.

JSW Steel: Saleable steel sales in Q3FY23 were at 4.95 mnt, down a marginal over 1% compared to 5.01 mnt in the previous quarter. But y-o-y sales volumes increased 24% against 4 mnt in the same quarter in FY22.

JSPL: Steel sales by JSPL stood at 1.90 mnt in Q3FY23, down 5% q-o-q against 2.01 mnt in Q2FY23. However, the same was up 4% against 1.82 mnt seen in same quarter a year ago. "A much-awaited pick-up in construction demand started towards the end of the quarter, leading to improvement in steel prices," the company said.

AM/NS India: Steel sales volumes dropped 3% q-o-q to 1.59 mnt in Q3FY23 against 1.63 mnt in Q2FY23. Y-o-y, volumes also dipped nearly 8% against 1.73 mnt in Q3FY22. AM/NS India being especially a flat steel producer, felt the impact of the export levy perhaps a little more than the others. The major share of India's steel exports comprise flat steels.

EBITDA
All the five steel majors showed a y-o-y decline in their earnings before interest, taxes, depreciation, and amortization (EBIDTA).

SAIL: The PSU major reported an EBIDTA plunge of 40% y-o-y to INR 2,197 crore in Q3FY23 against INR 3,659 crore in Q3FY22. Q-o-q, EBIDTA was up 87% against INR 1,174 crore in Q2FY23.

Tata Steel: The steel major's standalone EBITDA fell 57% y-o-y to INR 5,334 crore in Q3FY23 against INR 12,434 crore in Q3FY22. Q-o-q, the same rose 4% against INR 5,134 crores in Q2FY23.

JSW Steel: The operating EBIDTA touched INR 4,030 crore in Q3FY23, down a substantial 41% y-o-y compared to INR 6,797 crore in Q3FY22. Q-o-q the same was up a whopping 131% against INR 1,742 crore seen in Q2FY23.

JSPL: The Q3FY23 EBITDA decreased 32% y-o-y to INR 2,163 crore in comparison to INR 3,168 crore in Q3FY22. Q-o-q, the EBIDTA rose 52% against INR 1,426 crore in Q2FY23.

AM/NS India: The company reported an y-o-y EBITDA plunge of 63% to $162 million in Q3FY23, against $435 million in the same quarter in the previous year. The same was down 21% against $204 million seen in Q2FY23.

Profit after tax (PAT)
All the major mills treaded in negative territory -o-y, thanks to squeezed margins, declined export sales and an overall gloomy global scenario.

SAIL: The PSU steel major saw its net profit increase 220% q-o-q in Q3FY23 to INR 464 crore from -INR 386 crore in Q2FY23. But y-o-y, PAT showed a drop of 68% amid soaring expenses. "The challenging global situation and economic scenario all over the world had its impacts on the steel prices affecting the margins of the steelmakers," SAIL said in a statement.

Tata Steel: The Q3FY23 PAT showed a 293% drop to -INR 2,502 crore compared to INR 1,297 crore in Q2FY23. Y-o-y, too PAT was down 126% against INR 9,598 crore in Q3FY22. The loss was put down to higher expenses.

JSW Steel: The steel major posted negative profit after tax (PAT) a manifold rise in PAT to INR 1,234 crore against -INR 91 crore in Q2FY23. Y-o-y, net profit was down 64% compared to INR 3,424 crore in Q3FY22.

JSPL: PAT plunged 854% q-o-q to -INR 4,512 crore in Q3FY23 against -INR 473 crore in Q2FY23. Y-o-y, the net profit was down 363% against INR 1,714 crore in Q3FY22.

Outlook
With the government's sustained focus on enhancing capital expenditure in the infrastructure sector, domestic steel consumption is expected to increase in the short to medium term. Steel prices are on an upswing globally on improved demand outlook in China and also Europe. Overall, Q4 may fare better.

*Although numbers are given fiscal year-wise, AM/NS India follows the calendar year.