Ratings agency India Ratings warned that domestic steel makers may continue to face inadequate availability of domestic iron ore in the short-to-medium term and may have to import for meeting their requirements.
The agency feels that the domestic iron ore mining industry is undergoing a difficult phase given regulatory intervention in various states. Even though this intervention bodes well for the domestic industry in the long-term, the steel sector could face iron ore shortage in the short-to-medium run, the agency said in its latest report.
India’s steel-making capacity is slated to cross 100 mt in 2013 which will require about 160-170 mt of iron ore. However, there could be a shortage of about 30mn t given the on-going challenges in the mining sector, it added.
The agency, however, expects credit profiles of its rated steel producers to remain stable in 2013, driven by continuous but slow growth in domestic steel demand.
It expects the cost of funding working-capital requirements to remain high despite the marginal reduction in repo rate by the Reserve Bank of India in early 2012. It forsees a gradual reduction in interest rates in 2013 which should provide some relief in interest costs.
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