Metal Sector Q4 Results Preview: Companies expected to benefit from increase in volumes, rise in prices

The season of results for Q4FY23 is just about to kick off, and metal companies are expected to deliver good results in the fourth quarter of the recently-concluded financial year. Companies are likely to witness a rise in their profits since prices of ferrous and non-ferrous metals have risen.

Metal companies are expected to benefit since volumes are increasing, the ASP has improved, and costs are stable. 

The upbeat forecast about the metal results can also be gauged by the Nifty Metal index, which gained 1.76 per cent on Tuesday and closed at 5,668.25, up from 5,570.25 on Monday. 

Prices of steel in India shot up after the prices in the Chinese and international markets rose substantially. Last month, China announced it would raise domestic steel prices by about $39.59 per tonne. The rise was due to the increased demand of the metal in China, Europe, and the US after COVID-19 curbs were eased in these regions.
 
In the Indian market, the rise in realisations and volumes of steel are expected to boost companies' EBIDTA on a quarter-on-quarter basis.
 
In 4Q FY23, prices of hot-rolled coil (HRC) steel also went up in domestic and international markets. Indian steel mills last week hiked steel prices between Rs 2,000 and Rs 2,400 with the average HRC price touching the mark of Rs 61,000 per tonne for March deliveries. Other reasons behind the hike were the rise in prices of raw materials (iron ore and coking oil) in the domestic market.          

In India, domestic demand for metals is high. In its research note related to the steel sector in India last month, ICRA highlighted that domestic steel demand in the country is expected to grow 11.3 per cent in FY23. 

Metal companies are benefiting because export duties have been cut. The government in November waived off export duty on iron ore lumps and fines with 'less than 58 per cent Fe', while it reduced the export duty to 30 per cent on iron ore lumps and fines with 'more than 58 per cent Fe'.  

These collective reasons portray that the metal companies in India are in a healthy state and their robustness is expected to reflect in their results in a few days.