Tata Steel Ltd., India’s largest producer, said prices will decline by more than 10 percent this quarter as slowing economic growth and the global credit crunch forces builders and automakers to slash orders.
Prices per ton of steel will fall as much as 4,000 rupees ($80) by December, Chief Financial Officer Koushik Chatterjee said today in Mumbai, where the company is based. Demand from makers of trucks and buses have fallen, while supplies to cars and other light vehicle have remained flat, he said.
Deepening concerns about the global economic slump is keeping consumers away from purchases of houses, cars and home appliances, lowering demand for steel worldwide. ArcelorMittal, the world’s biggest steelmaker, and Tata Steel’s U.K. unit Corus have said they plan to cut production.
“Indian steelmakers will see a fall in realization by at least 20 percent this quarter as demand is hit,” said Bharath S., an analyst, at Sundaram BNP Paribas Mutual Fund, which sold Tata Steel shares last quarter. “Also, expenses are unlikely to come down as both raw material and borrowing costs remain high.”
Tata Steel shares fell 14 percent to 178 rupees at close of trading in Mumbai today. The stock has fallen 81 percent this year, compared with a 57 percent decline in the benchmark Sensitive Index. Rival Posco has dropped 56 percent in the period, Nippon Steel Corp. 60 percent and JFE Holdings Inc. 64 percent.
“Steel shares are being hammered because people don’t expect demand to revive in the next few quarters,” said Sanjay Makhija, vice president at Fortune Financial Services India Ltd. in Mumbai.
Earnings
Second-quarter profit, excluding unit Corus, rose to 17.9 billion rupees ($358 million), or 21.75 rupees a share, in the quarter ended Sept. 30 from 11.9 billion rupees, or 15.58 rupees, a year earlier, Tata Steel said today in a statement. Profit beat the 16.5 billion rupee median of five analyst estimates compiled by Bloomberg. Sales climbed 41 percent to 67.4 billion rupees.
Revenue from sources other than steelmaking jumped to 1.06 billion rupees from 610 million rupees a year earlier, the company said, without giving details. Tata Steel’s raw material costs surged 73 percent to 13.8 billion rupees, while interest charges rose 34 percent in the quarter.
The company reported a foreign-exchange loss of 3.45 billion rupees, compared with a gain of 610 million rupees, after a slide in the Indian currency against the dollar in the quarter forced the company to revalue its overseas debt.
Moody’s Investors Service lowered Tata’s credit-rating outlook on Oct. 22, citing challenges its U.K. unit faces because of the global economic slowdown.
The Indian rupee, which fell as much as 50 against the dollar to a record, is the worst performer in Asia this year after South Korea’s won.
Tata Steel is looking at forming iron-ore and coal ventures in Mozambique and scouting for limestone ventures in Oman, to secure raw material supplies, Chairman Ratan Tata said in August.
While Tata Steel imports a third of the coal needed for its mills in India and mines its own iron ore, Corus buys both the raw materials. Both iron ore and coking coal prices surged to a record this year on increased demand from China, the biggest producer of the metal.
Source:http://www.bloomberg.com/apps/news?pid=20601091&sid=a8ivswjjbXaM&refer=india
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