Tata Steel and JSW Steel will benefit from rising domestic demand in india

The profitability of Indian steel companies will remain the highest in the Asian region, amid growing supply glut and a negative outlook for Asian steel industry led by weak demand in China. In its latest Outlook for Steel industry in Asia, Moody's has said Indian companies like, Tata Steel and JSW Steel will benefit from captive iron ore supplies and rising domestic demand.

In particular, Moody's cited the country's relatively strong economic growth and the government's plans to revive infrastructure spending and increased steel consumption in the manufacturing sector will boost the country's steel demand. Indian companies like Tata Steel and JSW Steel will benefit from captive iron ore supplies and rising domestic demand. Moody's Macroeconomic Board forecast a GDP growth of 7.5% in 2015-16, up from 7.2% in 2014 and 6.45% in 2013. "We expect India to post single digit steel demand growth up from 2.2 % in 2014. To capture this growth, India's three largest steel manufacturers by production volume, Steel Authority of India Limited, Tata Steel and JSW Steel will add production capacity in the next one to two years," the report said.

Despite the pressure on steel prices from imports, profitability of companies like Tata Steel and JSW Steel will remain the highest in the region. Tata Steel's operations were negatively affected in Q4 2014 and Q1 2015 when the company had to import iron ore due to a ban on iron ore mining imposed in May 2014 following non-renewal of expired leases. The expensive iron ore imports led to Tata Steel's Indian operations reporting an EBITDA per tonne of $151 and $112 for Q4 of 2014 and Q1 of 2015 respectively, down from $250 per tonne in Q2 2014. With lifting of the ban on iron ore mining in December 2014 and resumption of mining activities earlier this year and the run down of the costly imported iron ore inventories, Tata Steel's Indian operations will see improvement in EBITDA, it said.

Elsewhere in Asia, Japanese steel companies such as Nippon Steel and Sumitomo Metal Corp and JFE Holdings will continue to benefit from the weak yen which makes their cost competitive though steel demand in Japan may remain weak in the coming 12 months. Korea will see slat demand in 2015 but profitability of Korean steelmakers will remain under pressure due to sluggish domestic demand. In auto and shipbuilding segments and increased imports from Chinese mills, the report pointed out.
 

                                                                                                                                                 

                                                                                                                                                   


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