Bruised by the export duty and falling margins, JSW Steel has reduced its capex from ₹25,000 crore to ₹20,000 crore for this fiscal. Domestic demand is slowing even as the company is ramping up capacity by 5 million tonnes per annum (mtpa) at Dolvi. In an interview with BusinessLine, Seshagiri Rao, Joint Managing Director, JSW Steel, exudes confidence that things will fall in place by the December quarter. Excerpts:


Has domestic demand revived?

The export duty on steel had an impact on the psychology of domestic users. International prices started falling from beginning of May and everybody expected domestic prices to follow suit. This led to a freeze on buying and a wait-and-watch mode. Dealers started exhausting their inventory instead of placing fresh orders. Though there was real consumption, apparent consumption had come down drastically. In addition, our ability to export was dented due to the export duty. On the other hand, cost pressure was building due to a spurt in energy prices after the Russia-Ukraine war. Prices of all key raw materials such as coking and thermal coal, refractories and ferro alloys have gone up. It was a triple-whammy with domestic demand slowing down, cost pressure building and the levy of export duty. To top it all, the rupee depreciated against the dollar. However, since July we are seeing good traction. The user industry saw global steel prices stablising and there has been buying across retail, construction, infrastructure and real estate. Enquiries have started coming. In the auto sector we had already sold 8 per cent more compared to last year. Among renewables, wind energy projects have started while solar is yet to restart.


Do you expect prices to fall further?

Today, Chinese FoB price is $632 (₹50,560) a tonne. If freight and customs duty of 7.5 per cent is added it works out to ₹59,000 per tonne and domestic prices are in the same range. Further fall in Chinese prices will depend on raw material prices. Coking coal has already corrected from $600 a tonne to below $230. It has gone down to a low of $110. We expect it to range at about $150 in the medium term. However, due to the Russia-Ukraine war it would hover at $200-230. With coking coal at current level and iron ore at $90-100 a tonne, it becomes very difficult for any country, including China, to reduce prices from the current level.


Will Russian imports put pressure on prices?

Total cargo booked from Russia is about 1.5 lakh tonnes of five cargos in the price range of ₹61,000-51,000 a tonne. If we consider the average, it should not be a threat for Indian companies. What was sold at ₹51,000 a tonne was a distress sale. It will not determine Indian prices. They cannot bring in large quantities as Russia does not have the logistics to handle this demand. Moreover, there are many sanctioned entities in Russia. It is very difficult to do business with any sanctioned entities.


Do you see export duty lifted anytime soon?

Though the objective of the export duty was to contain inflation it has caused a huge damage to the industry. Prices have already fallen more than 20 per cent in the Indian market. It deserves to be taken out. Government has also given indication that it is a temporary measure. We expect it to be removed this quarter.


Is JSW Steel becoming an export-dependent company?

We are dependent on exports of value-added steel. We export 25-30 per cent of steel production in India. We are exporting capacity that cannot be consumed in India. Export dependency cannot be seen as negative for the company. Yes, temporarily, because of the duty, it may appear so. The intention of the government is not to ban or moderate exports, but to curtail inflation and it is a short-term measure. We will continue to export 10-12 per cent even if the duty is retained.


Will cut in capex delay expansion plans?

Our capex are in four categories — capacity expansion from 27 mtpa to 37 mtpa, normal capex on operations, discretionary spends, and special projects. Growth and normal capex have been changed. We can either delay or stop discretionary and special capex depending on cash flow. Special projects give payback in two years and this can be delayed. Accordingly we have put discretionary and special projects worth ₹5,000 crore on hold.