The sluggish global steel market has begin to show its impact on the domestic industry with country’s largest steel makers reporting lower than expected profits.After Tata Steel, country’s largest steel maker Steel Authority of India Ltd (Sail) on Friday reported a 54.7 per cent decline in net profit to Rs 684.59 crore in the third quarter this fiscal as against Rs 1,514.24-crore profit in the corresponding period of previous fiscal.Tata Steel on Monday had also reported a 15 per cent decline in net profit due to a sluggish steel market where the steel prices have again fallen by about 5 per cent in December.The total income of Sail also decreased 18.3 per cent to Rs 6,443.39 crore during the October-December period of 2005-06 compared to Rs 7,889.2 crore in the same period last fiscal. Despite lower profits, the board of directors of Sail approved an interim dividend of 12.5 per cent 2005-06.Industry analysts say that 2006 is expected to be a difficult year for steel companies as their margins would remain under pressure. There is glut in the market due to increased production by China (in 2005 total production expected to be about 330 million tonnes), while demand for steel globally (mainly in China) has remained subdued.Though the domestic steel companies have only marginally reduced steel prices in the third quarter period, the problem has aggravated due to firm raw material prices particularly of coal and iron ore where prices have risen by over 50 per cent in last few months. For Sail, the increased freight cost (higher fuel rates) has impacted its profitability.The steel ministry has also projected that the prospect of an early recovery in prices are ‘remote’ with further fall in steel prices during the first quarter of 2006.The benchmark hot rolled coil (HRC) prices have fallen by 1-4 per cent in November and by 5 per cent in December. Moreover, steel imports into the country continue to rise, putting further pressure on integrated steel makers here.During April-November 2005, steel imports rose by almost 100 per cent to 2.42 million tonnes. Steel exports have also risen marginally during April-December period by 5.67 per cent to 3.5 million tonnes as compared to 3.31 million tonnes for the corresponding period of last year.
