Rising prices of coal to effect on steel companies' September qtr earnings

Coking coal prices, a key raw material used in the making of steel, have risen $25-$30 per tonne sequentially along with prices of other consumables.Due to this, varied impact on margins is expected for steel companies depending on their coal consumption pattern (domestic, international), share of captive resources and other factors, said brokerages.For Tata Steel, the country's oldest steel producer, domestic operations may be impacted partially by higher coking coal costs. Despite this, domestic realisation is expected to increase by Rs 2,000 per tonne, said an Edelweiss report. The company does have a captive source of coking coal up to 25-30 per cent which could lend support to realisations.

On a consolidated basis, however, a sharp improvement in earnings before interest, taxes, depreciation and ammortisation (EBITDA) is likely for Tata Steel led by turnaround performance of European operations, it said.

Domestic steel prices have been muted compared to April-June and there has been a divergence between flat and long products prices, said Systematix Institutional Equities.Domestic steel prices have been muted compared to April-June and there has been a divergence between flat and long products prices, said Systematix Institutional Equities. July-September being a seasonally weak quarter has also led to feeble demand in the domestic market, leading companies to turn to exports for increased sales.

Exports continue to boost sales with the share of exports rising to greater than 40 per cent in Q2FY22 (from 34 per cent in Q1FY22 and 38 per cent in Q2FY21), said JSPL in its release.