Godawari Power and Ispat’s (GPIL) sponge iron and billet production fell by 38pc and 26pc, respectively, from a year ago amid a slump in domestic demand induced by the COVID-19 pandemic, according to the company’s earnings release.
Outlook
Iron ore prices have rose from the levels of around $80/mt in April to $120/mt to hit a two-year high amid strong demand in China. Ore prices are despite global mining companies forecasts to maintain production and achieve their guidance targets. Pellet prices have moved in sync with higher iron ore prices to trade at $129/mt cif China. Godawari’s export shipments are booked till September.
In the domestic market, iron ore prices are likely to shoot up over the short to medium term due to higher bid premium placed by miners for mine allotted in recent auctions in Odisha. Pellet demand and prices continue to remain high due to a shortage of iron ore in the market. Domestic steel prices have returned to import parity.
Lower interest rate will reduce the company’s finance cost but other market factors may impact profitability, going ahead. Godawari will continue to focus on high-grade pellet production for exports and capative production of high-quality steel billets. The company plans to tweak product mix in line with market demand and increase production of value-added products.
Production
The company’s pellet production increased 36pc in Q1 in line with a surge in pellet exports. Pellet production at the company’s subsidiary Ardent Steel improved significantly despite the pandemic. Amid low domestic steel demand, Godawari exported 95pc of its total pellets production in Q1.
Godwari’s sponge iron and billet production in Q1 dropped by 34pc and 42pc from Q4 as the company’s capacity utilization normalised by the end of May. Currently, the company’s facilities are operating at 90pc capacity or pre-pandemic levels.
| Godawari Ispat Iron and Steel output in Q1 | |||||
|---|---|---|---|---|---|
| Production (mt) | Q1FY2021 | Q1FY2020 | YoY change | Q1FY2020 | QoQ change |
| Iron ore Pellets – GPIL | 4,64,150 | 4,76,700 | -3% | 4,41,000 | 5% |
| Iron Ore Pellets – ASL | 1,85,149 | 1,32,905 | 39% | 1,70,446 | 9% |
| Sponge Iron | 76,396 | 1,22,268 | -38% | 1,15,840 | -34% |
| Steel Billets | 56,510 | 76,465 | -26% | 97,070 | -42% |
In Q1, Godawari Power & Ispat’s net sales dropped by 15pc to Rs7,113mn ($95.01mn) and profit after tax (PAT) dipped by 12 pc to Rs504mn from a year ago quarter.
($1=Rs74.86)