‘In my view, steel prices in the country will remain stable’

JSW Steel and group firms Bhushan Power and Monnet Ispat, its joint managing director and group CFO Seshagiri Rao MVS

JSW Steel, the flagship company of the diversified JSW Group, has earmarked Rs 28,000 crore to hike production capacity to 36 million tonne (mt) in India by March 2025. This amount would be spent across JSW Steel and group firms Bhushan Power and Monnet Ispat, its joint managing director and group CFO Seshagiri Rao MVS said. In an interaction with Rajesh Kurup, Rao said that Indian steel prices are likely to remain stable. Edited excerpts:

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JSW Steel’s second-quarter net profit soared 350% on-year to Rs 7,179 crore? Where is the growth coming from?

Our overseas operations have turned around and contributed quite substantially, while our downstream products also did extremely well. The demand for our downstream products — tin plate to galvalume to galvising and colour coated — had picked up, while margins were also good both in export and domestic markets. There was also a general volume growth this year.

But the rising input costs were also a drag on operating performance?

In the last quarter, there was some increase in raw material prices such as coking coal to $400 from $110 per tonne, while iron ore price which used to be $100 went up to $230 per tonne. Prices of all other materials and freight rates also went up. However, the cost pressure did not fully reflect in Q2, which would be felt in this quarter especially that of coking coal.
On your Rs 28,000-crore capex plans?

JSW Steel’s production capacity, without considering that of Bhushan Power & Steel and Monnet Ispat & Energy, is at 23 mt and together with Bhushan and Monnet is at 27 mt. We are expanding to 36 mt in India by March 2025. This amount would be spend across JSW Steel, Bhushan Power and Monnet Ispat.

There is enough cash generation within the company, with the last half-year the company shown `20,700 crore of Ebitda. We will able to comfortably meet our capex programme from internal accruals without increasing debt.

Steel prices were on an upward spiral for the past few months. Will this sustain?

The underlying demand is quite strong due to government spending on infrastructure in India and globally. Further, the energy transition is translating into another layer of consumption for commodities, particularly steel. There was a correction in global prices, and when the global prices went up domestic prices were at a discount of 20-25% over landed costs of imports. Even though today the prices are corrected to the extent of $800 per tonne globally, domestic prices may not correct to that extent as they had not gone up earlier. In my view, Indian steel prices will remain stable.

JSW Steel is investing Rs 150 crore to set up a facility in Kashmir. It is a colour-coating facility being set up in Kashmir. The requirements for the region are currently being serviced from outside the region, since we don’t have a facility there. We are setting up the facility to meet existing demand from the region. Land has already been allocated and we will be taking up the project shortly.

On the rise in steel inventory due to container shortage?

As far as bulk cargo is concerned there is some easing, but there is a shortage of container availability. Shipping freight rates have corrected downwards, but container freight rates have not come down. Due to the persisting Covid-19 situation, there is a shortage of staff availability at ports and the turnaround of containers is taking longer.
Iron ore exports have also fallen.

This was because global prices fell below $100 from the earlier $230, and China was not importing. China’s steel production has fallen from a peak of 100 million tonne per month to about 70 million tonne. The prices crashed with the fall in demand. Therefore, it’s not remunerative to export iron ore.