NMDC Steel Ltd experienced a dramatic decline in profitability for the quarter ended June 2026, with net profit plunging 87.1% to ₹50.5 crore from ₹392 crore in the previous quarter. According to the company's earnings data, this represents one of the steepest sequential profit declines in recent quarters for the steelmaker. The sharp decline in operating profit and margins weighed on the company's bottom line despite revenue remaining relatively resilient during the quarter. The crisis comes as Indian steel mills face mounting pressure on margins due to rising global coking coal prices, driven by supply disruptions in Australia and China and the Iran war.
The company's revenue also faced pressure, declining 5.6% quarter-on-quarter to ₹3,662 crore compared with ₹3,879 crore in the preceding quarter. As reported by the company, this revenue decline occurred despite the steelmaker's efforts to maintain operational efficiency during the quarter. The relatively modest decline in revenue compared to the dramatic profit contraction highlights the severity of the margin compression faced by the company. With India meeting 95% of its coking coal needs through imports, where at least half is shipped from Australia, the country's steel sector is particularly vulnerable to global supply disruptions.
The most concerning aspect of NMDC Steel's Q1 performance was the significant shrinkage in margins, with EBITDA and margins halving sequentially. According to the company's earnings data, EBITDA fell 50.4% sequentially to ₹400 crore from ₹806 crore in the previous quarter, while the EBITDA margin contracted to 10.9% from 20.8%. Premium hard coking coal prices jumped 25% from last year to average $236 per metric tonne freight on board (FOB) Australia in the first seven months of 2026, as reported by CRU consultancy. For blast furnace-based steelmakers, every $10 a ton increase in coking coal prices adds approximately $7 to $9 per metric tonne to steelmaking costs, with little headroom to raise steel prices given competition from cheap Chinese steel.
India's heavy reliance on imported coking coal is creating significant cost pressures for the steel sector. Coking coal imports are expected to rise by between 2 million and 3 million tonnes in 2026-27 from 64 million tonnes a year earlier, according to commodities consultancy BigMint. The crisis is compounded by trade flow disruptions from the US-Iran war, with higher diesel, freight and insurance costs impacting transportation costs. Australia is expected to continue meeting at least half of India's coking coal needs, while discounts on Russian coal, which accounted for 24% of India's coking coal imports in recent years, have diminished over the past two years. Indian companies are turning to alternative suppliers, with experts expecting Mozambique to overtake Russia and the United States as the second largest exporter of coking coal to India after Australia.
The sharp decline in profitability and revenue performance reflects the challenging operating environment facing the steel sector during the quarter. The sequential nature of the decline suggests that NMDC Steel's performance was impacted by factors specific to the June 2026 quarter, rather than being part of a longer-term trend. Squeezed margins could impede investment and delay capacity expansion as Indian steelmakers step up spending to meet buoyant domestic demand driven by infrastructure and strong economic growth. With coking coal accounting for nearly 40% of steel production costs, the sector faces ongoing pressure from global supply disruptions and geopolitical tensions that continue to drive up input costs.
