Import, Export, Trade for MSMEs: Micro,
small, and medium enterprises (MSMEs), with higher exposure to long steel, will
grow 5-10 per cent, says CRISIL research.
Import,
Export, Trade for MSMEs: The steel industry is likely to face twin blows, after the
sharp adjustment in domestic steel prices and following the imposition of
export duty by the government. These changes are likely to result in a 2-4 per
cent fall in industry revenue in 2022-23 (FY23), according to the report by
Business Standard.
However, CRISIL Research shows that micro, small, and medium
enterprises (MSMEs), with higher exposure to long steel, will grow 5-10 per
cent.
The increase in domestic steel prices over the period of
January-May this year led to the imposition of export duty. This in turn led to
reduction in the price of flat steel by 25 per cent from its April peak, which
accounts for almost 80 per cent of finished steel exports and is dominated by
large steel players, as per the report. At the same time, the prices of long
steel saw a limited correction.
“We expect
flat-steel prices to correct by over 10 per cent in FY23, even as long-steel
prices remain largely resilient,” says the report.
The report
further says that long-steel prices of primary players are 6-8 per cent higher
year on year (YoY) for August 2022 and the prices of secondary players’ are
even higher owing to the increasing price of thermal coal, a key input for
them. The increasing input prices will constrain margins across the
board.
“Integrated
players, whose margin was 30 per cent in FY22, will see a margin correction of
400-600 basis points (bps) YoY this fiscal. Secondary players, with margins
typically at 9-10 per cent, will see a contraction of 150-200 bps,” suggests
the report.
Moreover, the
report finds that secondary players can expect healthy demand growth from the
infra and housing segment and lower dependence on exports. It will cushion the
margil fall, driving volume growth for the secondary players.
The current
fiscal is likely to see more demand for long steel (in domestic and international
markets) than flat-steel growth, benefitting MSMEs. Moreover, strong demand for
pig iron and sponge iron will support segment revenues.