JSW Steel: Profitability is aided by stable steel pricing and decreasing input costs

25 Jul 2023 , 10:45 AM

According to Jayant Acharya, the company’s joint managing director, who talked to ET, a slowdown in the decline of steel prices and moderating input costs will help JSW Steel’s margins during the remaining portion of the current fiscal year, notably in the second half.

Following months of pressure, the selling price of the alloy has bottomed out and should stay ‘range bound’ at the present time, according to Acharya. According to data, the cost of a tonne of benchmark hot-rolled coils (HRC) of steel is between Rs 55,000 and Rs 56,000 before taxes.

In contrast, coking coal prices have decreased recently, according to Acharya, who also stated that the company anticipates its average cost of coking coal to be lower by Rs 3,700-4,100 per tonne in the current quarter compared to the April-June period. Before shipping charges, the raw material sells for about Rs 19,000 per tonne.

According to him, the current quarter should also see a decline in iron ore prices. China, which produces more than half of the world’s steel, is expected to reduce production during the current quarter, which will also put pressure on iron ore prices.

Acharya told ET that the current quarter’s reduced pricing may have some adverse effects on margins, but performance in the first half of FY24 would be better.

The largest steelmaker in the nation based on local production capacity typically operates at over 90% capacity utilisation, averaging 92% utilisation from April to June. The company is seeking to increase its manufacturing capacity from 28 million tonnes annually to 37 million tonnes by the end of FY25 in order to achieve this.

In addition, the company acquired six iron ore mines through auction during the quarter, with plans to operationalize four of them over the next 12 months, according to Acharya. Currently, the corporation purchases the remaining 45% of its iron ore on the free market and receives 45% of it from captive mines. The ultimate goal, according to Acharya, was to raise captive iron ore source to 75%.

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