Big steelmakers such as Tata Steel, JSW Steel and ArcelorMittal Nippon will reap high profits as the steel prices rise above the pre-COVID levels. Prices have been shooting up for the last four months in line with the rise in iron ore prices. Big steelmakers with captive iron ore mines are largely unaffected by the rise in raw material cost, but are getting the benefits of the resultant rise in steel prices.
The second quarter is going to be an unexpected bumper for big steelmakers as steel prices are consistently moving up due to the pent-up demand in the domestic market. The margins are high in the domestic market, unlike the export. If first quarter survival was because of the export, the second quarter will be the resurgence story of the domestic market.
The high flat steel consumption of automobile and consumer durables industries has helped in the rise in domestic demand. However, the long products sale is yet to come back to normalcy because of the continuing gloom in the construction and infrastructure segments. The steelmakers expect that the construction and infrastructure segments will bounce back in the third quarter as road, bridges and metro works restart in most of the states.
Tata Steel traditionally procures entire iron ore from its mines. JSW Steel got big captive mines in Odisha recently and plans to scale up production to around 80 per cent of their requirement. ArcelorMittal had captive mines around the world and can route it to their unit in India.