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JSW Steel plans to invest ₹20,000 crore in capital expenditure this financial year and does not expect the new export duty to either impact its sales and output or bring down capacity utilisation.
The fresh capex includes ₹18,000 crore investment in JSW Steel and ₹2,000 crore in Bhushan Power and Steel. The company will spend ₹18,000 crore to increase production capacity to 36 mt, from 26 mt despite the possible moderation in demand due to hike in interest rate. The 10 mt production capacity will be added by March, 2024 .
Seshagiri Rao, Joint Managing Director, JSW Steel, told BusinessLine the company will not cut down on capex spending despite the possible moderation in demand or fall in prices due to the export levy.
The company had cut its planned capex of ₹18,240 crore to ₹14,198 crore last fiscal due to the second Covid wave , said Rao.
The company has given a guidance to produce 25 million tonnes of steel and sell 24 mt this fiscal. Despite the export duty, Rao expects shipments to be at last year’s level of 4.5 mt. The government had imposed an export duty of 15 per cent on steel products to bring down spiralling domestic prices.
However, in a bid to bring down production cost, the government has also waived off customs duty on the import of some raw materials, including coking coal and ferronickel, used by the steel industry.
Temporary measure
Rao said the export duty, as the company understands, is a temporary measure to cool down inflation.
JSW Steel has developed a long standing relation with customers in the overseas market and it cannot go to them and say that steel will not be sold to them due to the new export duty, he added.
Steel prices have fallen by 10 per cent in last few days tracing the trend in the international market on the back of a dip in raw material prices, he said.
While markets have given too much weightage to the export duty and turned negative on steel sector, it has completely missed out on the fall in raw material prices. The government has also increased the export duty on iron ore from 30 per cent to 50 per cent which will bring down cost substantially, he said.
Steel demand in the March quarter may be down when compared to the same period last year but sequentially it is up 7 per cent indicating that demand is still strong with robust government spending, he said.
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