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New Delhi, July 30 The impact of a correction in ferro-chrome prices is expected to be visible from Q3 FY23 numbers onwards, says Indian Metals and Ferro Alloys Ltd (IMFA), the Odisha-based value-added producer of the alloy. Despite the drop, the company is confident of sticking to its margin guidance of 25-30 per cent of EBITDA, on the back of good contract prices.
Ferro-chrome is a key raw material for making stainless steel.
According to Chief GCS, CFO & Company Secretary, IMFA, Prem Khandelwal, spot prices are around Rs 100,000 per tonne now. However, the contract price -- at which the bookings were done - is 20–30 per cent higher.
“Our contract prices are higher than spot prices at the moment. When the contract price was Rs 1,42,000 per tonne, the spot price was Rs 1,25,000 per tonne. The impact of ferro-chrome prices correcting will be visible in our Q3 numbers and onwards, when bookings are at the new or lower prices. Even then, assuming ferro-chrome spot prices are at Rs 100,000 per tonne, our contracts are being booked at Rs 1,20,000 per tonne, which gives us some headroom,” he told BusinessLine.
EBITDA margins, Khandelwal said, are expected to be within the guidance range for the integrated player, with the added advantage of cost management over other non-integrated players, who have seen their margins take a hit on the back of reduced demand and high coal and energy costs.
Nearly 70 per cent of IMFA’s coal requirements are met through the “washery reject” variant that is available in plenty, while the remaining 30 per cent is procured from auctions. “So our impact is limited to the 30 per cent we get from auctions. For instance, at one point, auction prices were Rs 10,000 per tonne, but have now dropped to Rs 3,000 per tonne,” he said.
For Q1FY23 (April-June), profit rpse by over 35 per cent y-o-y to Rs 134 crore; while revenues increased by around 40 per cent to Rs 744 crore, y-o-y. EBITDA improved to Rs 225 crore, up 27 per cent y-o-y.
Exports during the period under review increased by over 42 per cent to Rs 711 crore. In Q1FY22, exports were around Rs 500 crore.
Price Movements
According to Khandelwal, tender price announcements for major stainless steel mills are expected in August. Despite, recessionary pressures looming, prices could see some stability now. A “very sharp decline” from present levels is “unlikely”.
Trade sources say prices of Indian ferro-chrome are already “trending close to their cost of production”. So major price shocks are unlikely. Similarly, globally, the cost of production remains on the higher side because of coal prices.
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