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Metals Show No Signs Of An Apparent Demand Recovery: Motilal Oswal


BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

China crude steel production fell 3.3% YoY to 90.7 million tonne in June 2022. Production year-to-date stood at 526.38 million tonne (down 6.3% YoY).

If China were to maintain its CY21 production levels, its production in H2 CY22 is likely to be higher by 7.5%, implying an additional 35 million tonne. Given the weak current demand, this can spur growth in exports from China.

Domestic hot rolled coil prices continue to trend down, with domestic HRC prices, excluding Mumbai, at Rs 59,800/tonne. Massive premium on domestic HRC prices to export prices is unlikely to sustain if local demand remains muted. We expect domestic prices to correct further.

Coking coal has corrected by 37% in the last one month and by 49% from its Q4 FY22 average. This will help normalisation of Ebitda margin for steel producers in Q3 FY23.

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