Posted on 24 Jan 2023
The withdrawal of export duties and China opening its economy would bring in further gains to the Indian steel sector, and the fourth quarter is expected to be a better period. Further, the correction in raw material and steel prices would open up export avenues for the sector, according to a top official at JSW Steel.
However, the sentiment for FY24 is “cautious” as overall steel prices will remain range bound and the margins will get normalised, JSW Steel joint MD and group CFO Seshagiri Rao MVS told FE in an interaction.
“The steel prices rose by more than $100 per tonne in January after China relaxed Covid-19 protocols and opened up its economy as commodity prices also improved. The withdrawal of export duty in November would also be beneficial to the sector, and fourth quarter would be good for the sector,” Rao told FE in an interaction.
“The overall global economy is not looking great because of various factors such a high interest rates, difficult financial conditions, and at the same time every country has large debts relative to their GDPs. There is a fear of a slowdown to mild recession, and China opening up also may be more of consumption driven than investment,” he said.
However, the Indian economy is in a much better shape as the macroeconomic parametres are “quite good”. The drivers include government spending on the infrastructure ₹7.50 trillion, which is also supplemented by state governments, robust uptick in residential construction, revival in automotive industry and a good traction in renewables solar and wind power.
“For India, export opportunities are emerging from markets such as the Middle East, ASEAN countries such as Malaysia, Thailand and Vietnam, and Europe due to the correction in raw material and steel prices. In Europe, the production cuts are much deeper than demand, and import of steel into Europe remained at around 18-20 million tonne,” he added.
On the debt, Rao said the company intends to bring it down by another ₹3,000-4,000 crore by March this year by unlocking inventory. The company had a debt of ₹69,500 crore as of December 31, of which ₹3,500 was due to the rupee fluctuations.
JSW Steel has put its plans to sell its business in Italy, including that of Aferpi SpA, on hold as the company has won a major order, close to $900 million from Italians railways in Q3, and is expected to do well in Q1.
The company had earlier put its Italian businesses, which were acquired in 2018, on the block as rising raw material costs and geo-political issues hindered its operations and attempts to revive them failed. It had acquired the entire stake in three Italian businesses – Aferpi SpA and Piombino Logistics SpA – and 69.27% in GSI Lucchini SpA for €55 million ($64.7 million or Rs 440 crore), as part of its overseas expansion plans.
JSW Steel is also looking to manufacture electrical steels in joint venture with Japanese companies. “We are doing a feasibility study, which will be completed in the next few weeks, and we looking at manufacturing in India. This will be done under the PLI scheme.”
The group is also planning to foray into EV, with manufacturing of four-wheeler electric cars in India. “This is forward integration, the future is electric and we also betting big on it,” Rao added.
The company’s capex plans of investing ₹49,000 crore are on track, out of which ₹15,000 crore would be spend in this financial year, ₹20,000 crore in next financial year and the balance by FY25. For the nine months of this fiscal the company’s capex spend stood at ₹10,707 crore, the remaining would be invested in March quarter.
Source:Financial Express
