India's primary mills Q1FY'22 performance sees Covid shadow

Most of the major mills announced their first quarter (Q1FY’22) performance some time back. SteelMint, while checking out their performed in terms of crude steel output, domestic and export sales, and EBIDTA, realised that all the four biggies being reviewed saw their Q1 production dip q-o-q.

Also, domestic sales took a hit because of the second wave of the pandemic that swept right through Q1. Consequently, their export performance was good although poorer compared to the same period last fiscal.

Crude steel production

SAIL: This public sector behemoth reported a crude steel production decline of 16% q-o-q in Q1 to 3.77 million tonnes (mn t) compared to 4.56 mn t in Q4FY’21. This was mainly due to the second wave of Covid-19 and repairs at a blast furnace in ISP for 23 days. It needed another five days to get back to operational normalcy.
Tata Steel: This steel major’s crude steel production grew 55% y-o-y in Q1FY’22 as Q1FY’21 had been impacted due to the Covid-19 pandemic and the stringent nationwide lockdown. However, crude steel production decreased 2.6% q-o-q due to supply of over 47,800 tonnes of liquid medical oxygen to hospitals amidst the second wave of the pandemic. Steel deliveries declined 11% q-o-q due to partial lockdowns announced by some of states and temporary shutdowns in a few steel-consuming sectors amidst the second wave. To offset the impact, exports were increased to 16% of the total sales versus 11% in 4QFY’21. Tata Steel India deliveries increased by 42% y-o-y.
JSW Steel: Crude steel production of this integrated major declined by a marginal 2% to 4.10 mn t in Q1FY’22, as against 4.19 mn t in Q4FY’21. Along with this, flat steel production stood at 2.94 mn t and long steel production at 0.96 mn t in Q1. The capacity utilisation rate stood at 91% in Q1, down 2% q-o-q, due to the diversion of liquid oxygen for medical use during the second wave of Covid.
JSPL: Jindal Steel and Power Limited (JSPL) recorded its second highest quarterly production of crude steel at 2.01 mn t in Q1FY’22. The previous high was 2.07 mn t in Q4FY’21. The production volume was up 20% y-o-y compared to 1.67 mn t in the year-ago period. The company aims to produce 8-8.5 mn t of steel in FY’22 and reduce overall debt to INR 9,900 crore by the end of this financial year.
AM/NS: Company’s crude steel output stood at 1.831 mn t in Q1FY21 against 1.824 mn t in previous quarter.However on y-o-y basis the same stood at 1.218 mn t

Sales

SAIL: The sales volumes in Q1FY’22 dropped by 25% to 3.327 mn t as compared to 4.435 mn t in Q4 of the previous fiscal. Demand in the country was sluggish due to the second wave of Covid-19 and lockdowns in the Apr-Jun’21 period. SAIL has highlighted that sales guidance for FY’22 will be 16-6.5 mn t and the company is hopeful of achieving its target.
Tata Steel: The company reported a decline in sales volumes by 11% in Q1FY’22 to 4.15 mn t in comparison to 4.67 mn t a quarter ago. The decline exhibits a huge impact of Covid-19’s second wave along with weak demand due to seasonal lull in the domestic market.
JSW Steel: The company’s total sales stood at 3.61 mn t in Q1FY’22 as against 4.06 mn t in Q4FY’21, down by 11% q-o-q due to lower domestic demand amid the second wave of Covid-19, especially in the southern and western regions of the country. Sales of flat steel products were at 2.67 mn t, while long product sales stood at 0.84 mn t. JSW’s sales of semi-finished steel were recorded at 0.10 mn t in Q1FY’22.
JSPL: Domestic sales were up a marginal 3% in Q1FY’22 to 1.61 mn t as against 1.56 in the corresponding period last year (CPLY).
AM/NS: The company’s sales volumes stood at 1.721 mn t in Q1FY22 against 1.705 mn t in previous quarter.However on y-o-y basis the same stood at 1.234 mn t in Q2FY21

Exports

SAIL: For Q1FY’22, the share of exports in total sales was 11% while total sales stood at 3.32 mn t in the quarter under review. The company shifted its interest sharply to exports on better price realisations as compared to domestic prices.
Tata Steel: The company reported sharp increase in its export sales in Q1FY’22 over sluggish demand in the domestic market. Export volumes stood at 0.65 mn t in the quarter as against 0.51 mn t in the last quarter (Q4FY’21). However, a year ago, the company exported around 1.47 mn t due to region-wise phased lockdowns.
JSW Steel: The company reported a sharp 16% increase in its export volumes to offset the fall in domestic demand due to the second wave of Covid-19. Net sales realisations increased 19% q-o-q, driven by higher realisations from exports and favourable product mix.
JSPL: Demand in the overseas market was robust with Indian mills focusing on the countries in the Middle East, Gulf and European Union which led to exports touching 34% of total sales, equivalent to 0.547 mn t, in Q1FY’22. However, the export volumes were 40% down from 0.905 mn t (58% of total sales) in Q1 of previous fiscal.
AM/NS: The manufacturer’s export volumes spiked to 0.75 mn t in Q1FY’22 as against 0.28 mn t in the preceding quarter. Meanwhile, the same was up by 23% annually against 0.61 mn t in CPLY.

EBITDA

SAIL: Reporting an EBIDTA of INR 6,674 crore, the company witnessed a 3% growth against INR 6,473 crore in Q4FY’21. However, the steelmaker had incurred losses of INR 125 crore in Q1 of the previous fiscal because of the Covid-19-led nationwide lockdown.
Tata Steel: The steel major achieved its highest-ever standalone EBITDA of INR 10,274 crore in Q1FY’22, up 12% against INR 9,206 crore in Q4FY’21. On an annualised basis, the EBITDA saw a sharp growth against INR 1,291 crore in Q1FY’21.
JSW Steel: The company has posted the highest-ever operating EBIDTA at INR 9,491 crore in Q1FY’22 as against INR 1,429 crore in the corresponding period last year, as per company reports. Higher realisations in the export and domestic markets and an enriched product mix resulted in a better quarterly EBIDTA. High steel prices helped offset the surge in iron ore and coking coal prices.
JSPL: Consolidated EBITDA grew 151% to INR 4,539 crore during the period under review, as against INR 1,810 crore seen in CPLY. The EBIDTA was pulled up mainly by higher export sales and net sales realisation (NSR).
AM/NS: AMNS India generated EBITDA of $607 million (100% basis) as compared to $403 million in 1Q 2021.

Outlook
All these mills are expanding capacity. SAIL is looking at additional 14-15 mn t of capacity across Bokaro, Rourkela and Burnpur plants, where land is available. Tata Steel is into the next phase of expansion at Kalinganagar with a 6-mntpa pellet plant and 2.2-mntpa CRM complex expansion. JSW Steel is expecting to complete its Dolvi expansion by next year while JSPL is planning a new hot strip mill in Angul to convert semis to finished.

Domestic demand in the latter part of the year is expected to be comparatively healthier because of improved consumption, mainly from sectors like infrastructure, manufacturing, automotive, consumer durables etc. The accelerated vaccination drive will improve business sentiment in the near term.

However, a slowdown in Chinese consumption may impact the mills in terms of exports going forward.