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Ukraine-Russia conflict to burden steel makers with higher input cost: Icra

The ongoing conflict between Ukraine and Russia will burden domestic steelmakers with high input costs, according to rating agency Icra.

However, the tension between the countries provides export opportunities to the Indian steel players, the rating agency said in a statement on Monday.

“Russia-Ukraine conflict to heighten input cost pressures, but also open up export opportunities for Indian steel companies. Sanctions on Russia could open new export opportunities for Indian steel mills in geographies like Europe, the Middle East and the USA, which could face supply shortages in the near term,” it said.

Notwithstanding the input cost pressures, the industry earnings are expected to remain healthy in the next 12 months and its outlook for the industry remains positive, Icra further said.

The domestic steel demand is also pegged to grow at 7-8 per cent in FY2023 on the back of an estimated growth of 11-12 per cent in FY2022, supported by the government’s large infrastructure spending plans.

Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, Icra, said, “After reporting a steep 65-70 per cent sequential increase in the cost of coking coal in Q3 FY2022, a further increase of 15 per cent QoQ ( quarter-on-quarter) is expected in the fourth quarter.Though the price of iron ore has moderated somewhat from the highs of Q3, and domestic mills have announced some steel price hikes from late January 2022, these will not be able to entirely compensate for the steep rise in cooking coal costs”.

“The ongoing conflict in Eastern Europe could further exert input cost pressures on domestic steel mills, which makes us believe that the gross spreads for a primary steel producer, who is dependent on the market purchase of raw material…”

According to Icra, apart from supplying several steelmaking raw materials, Russia and Ukraine are the 5th and 12th largest steelmakers in the world respectively, cumulatively accounting for around 10 per cent of the global steel trade.

India is the second-largest steel producing country in the world.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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