Don’t see further price correction, says JSW Steel’s Seshagiri Rao- QHN

Steel prices appear to have reached their bottom and are likely to go up from their current levels if supply adjustments globally are any indication in the sector, a top JSW Steel official said on Sunday.

Steel prices fell around 40 per cent to Rs 55,000-57,000 a tonne in the domestic market.

The prices had started falling from April-end.

I don’t foresee further downside in steel prices. Globally, there is a production cut of 62 million tonne. Moreover, 29 per cent of Chinese steel capacity is under bankruptcy. Global supply adjustments and higher Indian steel consumption will help keep prices firm, JSW Joint Managing Director and Group CFO Seshagiri Rao told PTI in an interview.

Compared to 2021-22, domestic steel demand will be higher by nine million tonne to 115 million tonne by March this financial year, he said.

The World Steel Association forecasts that demand for the metal will contract by 2.3 per cent in 2022 to reach 1,796.7 million tonne, after an increase by 2.8 per cent in 2021, on account of high inflation, monetary tightening, and China’s economic slowdown.

Rao stated that the lag effect of high input cost, supply constraints and weak steel prices is now over and expects the company will perform better both volume-wise and financially.

Compared to the first half period ending September 2022, JSW anticipates volume sales growth of 30 per cent in the last two quarters of the current fiscal.

JSW Steel has maintained its 2022-23 production and sales goals of 25 million tonne and 24 million tonne, respectively, Rao said.

In the first half of the fiscal, the production grew by 11.6 per cent for Sajjan Jindal-controlled steel company.

JSW had suffered Rs 2,578 per tonne EBITDA (earnings before interest, taxes, depreciation, and amortization) margin erosion in the second quarter of FY23, mainly due to inventory and currency losses along with supply-side hiccups.

Weak steel prices, inventory and mark-to-market forex losses significantly impacted the steelmaker’s performance in the second quarter of FY23.

JSW Steel reported a consolidated net loss of Rs 915 crore for the quarter ended September due to slump in steel prices.

However, Rao stated that “these factors are now over, and the benefits of lower raw material prices are getting percolated”.

Without providing any specific forward guidance, he said the physical and financial performance would improve significantly from the third quarter onwards.

Analysts predicted that the company’s EBITDA margin would get back to over Rs 6,000 per tonne in the second half of the year, up from Rs 3,479 per tonne in Q2’FY23 as a result of lower input costs, increased production capacity, supply-side easing of raw materials with increased captive mining, and the absence of inventory losses.

JSW has ramped up Bhushan Power and Steel capacity from 2.75 million tonne to 3.75 million tonne, while its another unit Dolvi in Maharastra was operating at 80 per cent capacity, the executive said.

Speaking about the Odisha steel project, Rao said the company’s capex (capital expenditure) to construct raw material supply infrastructure remains on track.

He also mentioned that the steelmaker is going ahead with the Rs 5,000-crore slurry pipeline and Rs 3500 crore into mining.

JSW Steel official does not foresee any shift in policy on export duty in the near term but said the abolition of it would have increased steel exports helping greater utilisation of idle capacity.