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Fitch Ratings expects profit margins of steel producers to remain under pressure in next two quarters of 2012.
This was attributed to persistent increases in the cost of steel production and steel producers' limited ability to pass on higher costs due to subdued demand.
Fitch also believes steel prices may soften in July through September 2012 as demand for long steel will fall with the onset of monsoons and the consequent slowdown in construction activity.
The positive impact of softer key raw material (iron ore and coking coal) prices globally has been offset by a depreciating rupee. As the bulk of coking coal is imported, a weaker rupee will adversely affect the profit margins of steel producers.
As domestic steel prices are aligned to the price of imported steel, a depreciating rupee helps in cushioning the impact on EBITDA.
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