ICRA analysis on surging Coking coal price impact on Steel Industry. Have listed key talk points below for your perusal.
- v ICRA expects coking coal contract prices in Q1 CY2017 to be lower than the highs of Q4 CY2016.
- v The sharp rally in international coking coal price is likely to hurt domestic blast furnace players. ICRA estimates that increase in the cost of steel production for domestic blast furnace players dependent on imported coking coal will be at around Rs 5,750/MT (~17% of hot-rolled coil price in October 2016)
- v The benefits from trade protection measures, which helped in the recovery in hot rolled coil (HRC) prices by Rs 8,500/MT between February and October of CY2016, are likely to largely disappear after the end of Q3 FY2017.
- v Gross contribution levels of domestic blast furnace players in Q4 FY2017 is likely to dip by around Rs 4,000/MT over Q3 FY2017 unless the increased coking coal costs are accompanied by commensurate price hikes by the steel makers.
