JSW Steel Limited Crude steel production for the month of November reported a growth of 10% year-on-year. The company’s flat steel production grew 4% year-over-year, while long products saw a strong 13% growth. These numbers exclude trial production from the expansion of the second phase of Dolvi works for the month of November’21. If this were also included, the growth would have been stronger.
It is this expansion that is likely to drive growth for the company as we move forward. The integrated operation of the Dolvi 5 Million Tonnes Per Annum (MTPA) brownfield expansion had already commenced. With this the company’s capacity has increased to 23 MTPA. JSW Group’s capacity (including capacity under joint control) in India and USA has increased to 28 MTPA. Meanwhile, the ongoing expansion will help drive further growth for the company. The company’s 5 MTPA brownfield expansion at Vijayanagar is progressing well, with civil works underway at the site. The downstream expansion projects at Vijayanagar, Vasind and Tarapur are in advanced stages of implementation. Overall, this will add 7.5mtpa to the company’s capacity by FY24.
The demand environment, which currently remains a bit sluggish, is expected to pick up pace in Q4. Indian Steel Association (ISA) expects Indian steel demand to grow by around 6.7% during 2022. This should also help with support volume and receipts. After a regular correction for over a year, steel realizations also saw some improvement during the current quarter.
According to Nomura Research, by how much did JSW Steel cut the prices of HRC (Hot-Rolled Coil) and CRC (Cold-Rolled Coil)? 2,500/ton to 68,000/ton and 75,000/tonne respectively for delivery in early December-21. Channel inventory levels remained relatively high and weak demand forced the company to cut prices. The recent price correction has also raised concerns about margins.
However, on the positive side, raw material prices are also coming down. The reduction in input cost should be supported by reduction in the prices of iron-ore lumps and fines by the country’s largest iron-ore producer NMDC Ltd. 870/tonne and Rs.200/tonne respectively for Dec’21.
International coking coal prices, which had seen a sharp jump, are also easing gradually and declined 9% month-on-month to $385 a tonne for November-21 as per Nomura Research data for December 3 , which also shows that the current price was even lower. At $316/ton due to fall in the last two weeks.
Moderation in input costs, increased volumes should help earnings as a weak demand environment leads to some recovery in realizations. say, analysts. Shares whose prices have fallen more than 10% since August are a big part of concerns over weak demand and a recovery in steel prices during the third quarter.
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