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Rupee depreciation to hit steel firms

Rupee depreciation to hit steel firms

Analysts feel that the depreciation of rupee against the dollar may affect the bottomlines of steel companies further.

Already, companies like JSW Steel, Steel Authority of India (SAIL) bore the brunt because of the unfavourable exchange rate.

The depreciating rupee may further hurt the cost of production of steel companies in turn affecting their margins.

Further, analysts expect prices of coking coal, a key raw material in steel making, to rise from now as it has already reached a low of around $135-140 per tonne.

The import bill of steel companies may rise because of the depreciating rupee, taking their cost of production even higher in coming quarters, said analysts.

Steel firms may also have to face another challenge of slackness in demand and analysts expect that it may be difficult for the sector to even beat the 3.5 percent demand growth achieved in 2012-13 (Apr-Mar). The domestic steel demand has grown only 0.3 percent in Apr-Jun.

Indian steel makers largely depend on import for coking coal. The rupee has weakened by about 12 percent since May-end.

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