Steel Makers Likely to Witness Immense Margin Pressure

SEATTLE (Scrap Monster): The latest research report by CRISIL says that margins of non-integrated steel manufacturers are likely to come under pressure, mainly on account of rising iron ore prices. Incidentally, iron ore prices contribute to nearly 15% of the total operating cost of non-integrated steelmakers.

According to CRISIL, iron ore leases accounting for almost 30% of the total steel production in the country, mostly held by merchant miners, is due to expire in 2020. This could result in significant reduction in overall iron ore output by the country. The prices of the steelmaking raw material are likely to rise further before the auctions, considering the elevated prices in the global market.

The non-integrated steelmakers without captive mines will have to face nearly 20% hike in costs. Larger players too will witness pressure on their revenue growth in the near-to-medium term, due to projected decline in prices for domestic flat and long steel products.