Steel demand to be subdued in September quarter: Seshagiri Rao

Suresh P Iyengar Mumbai | Updated on July 30, 2021

Post September, it is expected to pick-up sharply

Having achieved a record profit of ₹5,900 crore in the June quarter, JSW Steel has set its eye on next phase of growth. The upturn in steel prices has come when doubling of its Dolvi plant to 10 MTPA is close to completion. Seshagiri Rao, Joint Managing Director, JSW Steel spoke to BusinessLine on future outlook. Excerpts:

Have high steel prices led to record prices?

More than the high prices, the profit was driven by complete turnaround in our overseas subsidiaries. In the US, last quarter, we had an EBITDA loss of ₹322 crore; it turned out to be ₹282 crore positive EBITDA. The Indian subsidiaries contributed ₹1,145 crore against ₹321 crore in the previous quarter. In all, there was a swing of ₹825 crore from subsidiary companies itself. Joint ventures chipped-in another ₹322 crore. Bhushan Power and Steel has made a profit ₹745 crore; and ₹63 crore by Monnet Ispat. In these, the share of JSW Steel’s profit was ₹322 crore.

Do you think assets acquired under IBC will turn around faster than expected?

In Monnet Ispat, we expected a turnaround in three years which ends this September. However, the last step for turning the asset around is currently going on. We took over BPSL during the upturn in steel demand and it will become profitable much faster. While the turnaround of Monnet Ispat will be delayed by a year but BPSL will be ahead of our expectations. We have approached the Supreme Court for a quick hearing of the BPSL case and it will be taken up in the third week of August.

Do you expect demand to slow down with monsoon setting in?

We are expecting the demand in the September quarter to be subdued due to the monsoon. After September, demand will pick-up sharply. Like last year, steel demand increased from 12 million tonnes in June quarter to 24 MT the following quarter. The monsoon impact will be more on the construction and infrastructure side. The demand in automotive, yellow goods, tin plates and packaging are doing well compared to the first wave of Covid.

Will high steel prices sustain?

We have seen some fall in prices in July. The series of steps taken by China has led steep fall in prices. In the last one week, China prices have started moving up. Interestingly, prices in the US and Europe never came down. Fall in prices is limited only in Asia. Both the US and Europe have built strong restrictions on imports from China. US has put import duty ranging from 25 per cent to 50 per cent on Chinese imports. Europe has levied anti-dumping duty and imposed quota against all other countries. So, exports cannot happen to these countries anymore. Overall, global demand remains very strong with money being spent on infrastructure by the government or energy transition. Steel prices are to remain strong due to heavy consumption by these two sectors and cost-push from iron ore and coking coal.

Will you go slow on Odisha greenfield project?

We will look at it once the Dolvi expansion is completed. We have applied for environment clearance. We expect to get all the clearance and get the land transferred to us by end of this fiscal.

Has transportation of iron ore from Odisha eased?

Evacuation of iron ore from mine still a challenge due to infrastructure bottleneck. We are planning to set up 380 km pipeline from mine to Paradip port in three years. Pending this, we are using multiple ports including Dhamra, Haldia and Paradip and also using railways to transport iron ore directly to Vijayanagar. But all are very expensive modes of transportation.

Will you look at steel company being divested by the Government?

We are one of the shortlisted bidders for Neelachal Ispat and they have opened the data room few days back. We are getting the information and examining it. The data room is not available for NMDC’s 3 MT Nagarnar steel plant which is close to completion.

Are steel imports a concern?

Imports have come down by 25 per cent to 1.2 MT in June quarter. Of the overall tinplates imported 72 per cent were defective material. Moreover, Korean companies have downstream production in India and they import primary steel from their country. For instance, Hyundai imports 70-80 per cent of steel required in India claiming that their parent in Korea has the patent for these products.

Published on July 30, 2021

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