JSW Steel's export push can sustain rebound

After a tough first half of FY23, India's leading steel producer JSW Steel showed some recovery in the December quarter. The momentum could continue in near term, with the company looking to increase its export after the recent removal of export duties and uptick in global demand after Chinese economy showed signs of opening up. But upside may be capped due to expected slowdown in 2023.

For the December quarter, the company's Ebitda rose by 160% sequentially to ₹4,547 crore, although down sharply over last year's corresponding quarter. Lower raw material costs helped. But several cost-saving investments which it commissioned also have started showing. Revenues stood at ₹39,134 crore, down 6% QoQ and net profit at ₹474 crore vs loss of ₹915 crore.

It produced 6.14 million tonnes - highest ever - and 10% higher sequentially. Higher utilization in Dolvi plant and restarting of JSW Ispat Special Products helped. It increased capacity at Bhushan Power and Steel by 0.75 mtpa to 3.5 mtpa, taking capacity to 28 mtpa. Higher production led to higher inventories of 7 MT.

"In Q4, we will try reducing this inventory and push more in international market as international prices have picked up and 15% penalty on export is not there," said Seshagiri Rao, joint MD, JSW Steel. The company's export has fallen to 7% of sales in December quarter from 23% last year. The company has guided for a 6.34 MT for March quarter vs 6.06 MT in December quarter. In terms of sales volumes, guidance is 7 MT against 5.5 MT. "Rich product mix, cost-saving measures and better prices should help in this quarter," he added.

Chinese steel prices have risen to $640 a tonne from $530 in November 2022. Will price sustain? Prices may sustain but unlikely to see previous high, said Rao, citing expected slowdown and unlikelihood of investment-related growth in China.