Primary steelmakers may sustain operating profitability at Rs 10,500-11,000 per tonne in FY27: Crisil
Despite higher input cost, Crisil Ratings has said that primary steel makers are likely to maintain operating profitability of Rs 10,500-11,000 per tonne in the current fiscal (FY27), supported by higher global steel prices and effect of the safeguard duty imposed last year. Favourable pricing, coupled with healthy demand growth, is expected to strengthen cash accruals and support capex requirements while sustaining stable credit profiles.
Amid higher coking coal prices and elevated logistics and energy costs, the cost of production for primary steel producers - producers of steel predominantly through BF-BOF (blast furnace-basic oxygen furnace) route is estimated to increase by around Rs 2,000 per tonne this fiscal, to Rs 53,000 - 54,000 per tonne. Crisil added that coking coal, which accounts for nearly 40% of production costs, is expected to become 5-7% costlier amid potential supply disruptions in key exporting regions and sustained demand from major steel producing countries. Besides, higher freight, shipping and insurance costs, along with elevated power and fuel expenses, will further add to cost pressures.
However, the rising cost pressures are expected to offset by higher steel prices, continued protection under the 11.5% safeguard duty and healthy domestic demand growth, keeping profitability steady. Crisil expects domestic steel prices to increase by 6-8% in this fiscal. It added that domestic steel demand is expected to remain healthy, growing 5-7% this fiscal on the high base of fiscal 2026, supported by sustained investments in infrastructure and robust demand from the automotive, engineering and construction sectors.
