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Ferro-chrome miner, IMFA Ltd, expects economic uncertainties in European markets – a key consumer that continues to determine global price movements of the metal – would impact chrome prices by 6-7 per cent in Q4FY24 (January–March). The company is, however, hopeful that prices would remain range-bound to the tune of Rs 100,000 per tonne in FY25.
Ferro-chrome is a key raw material in the manufacture of stainless steel. European stainless steel consumption, apart from demand in Asian markets, are seen as major price movers. While the average per capita stainless steel consumption in India is close to 2 kg, the per capita consumption in Europe and China is as high as 8 kg and 4 kg, respectively.
According to Prem Khandelwal, CFO, IMFA Ltd, realisations improved to Rs 103,000 per tonne in Q3FY24 (quarter ending December 2023), up 11 per cent on the Rs 93,000 per tonne in the previous year. However, prices have declined in January, , with the stress on European economies continuing.
Prices have declined 6-7 per cent in the month (9 cents in value terms) and a similar trend is expected to play out across the quarter.
“We were expecting ferro-chrome prices would roll over, post the Rs 103,000 per tonne exit in Q3. But so far in January, there has been a decline. The European market remains stressed. And here on the Asian side, China continues to grapple to shore up demand. So, we are hopeful that ferro-chrome prices will hover in the range of Rs 96,000–Rs 100,000 per tonne in the quarter,” he told businessline.
“For FY25, our price guidance is in the Rs 100,000 per tonne range,” Khandelwal added.
Nearly 90-95 per cent of IMFA’s volumes and sales numbers are driven by exports, mostly to Asian countries such as Korea, Taiwan and Japan. It also has some exposure to China. Of Rs 685.27 crore in revenues reported in Q3FY24, Rs 650 crore-odd was driven by exports.
“So, we have a cushion in volumes, as Korea and Taiwan account for more than 50 per cent of our sales. Then there is Japan,” Khandelwal said.
The company is targeting an EBITDA margin of 23-24 per cent in the fiscal, at least 400 basis points higher than the 19 per cent (EBITDA margin) it reported in FY23.
Apart from improving ferro-chrome prices (YoY-basis), the company has carried out cost control measures. The price of thermal coal (used in power production) is also lower. The cost per tonne is down to Rs 72,000 (10 per cent YoY), while coal costs are lower at Rs 3.11 on a per unit of power produced basis (from Rs 3.44).
For Q3FY24, the company reported a PAT of Rs 107.87 crore, up nearly 10-fold from the Rs 10.43 crore in the year-ago period. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased 150 per cent YoY to Rs 167.87 crore (from Rs 67 crore).
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