Steel major JSW Steel has set a production guidance of 25 million tonnes (mnt) of crude steel in FY2023, company officials divulged at the investor’s call held on 22 July, 2022.
The company expects steel prices to remain rangebound in the near term and cost is likely to reduce due to consumption of high-value inventory by October 2022, and better margins from Q3 onwards.
On export duty:
The company expects the export duty to be a temporary measure as it was imposed to contain inflation and anticipates it to be moderated or removed in H2CY’22.
Update on projects:
- Brownfield expansion of 5 mnt at Vijayanagar works is under progress and is expected to be completed by FY’24.
- The remaining downstream projects at Vasind and Tarapur are expected to be completed in Q2FY’23.
- The expansion of BPSL to 3.5 mnt is expected to be completed during Q2FY’23 and further the phase II expansion to 5 mnt by FY’24.
- The capex spend in Q1FY’23 was INR 3,702 crore against the planned capex spend of INR 20,000 crore for FY’23. Furthermore, the company expects to calibrate its capex spend to INR 15,000 crore for FY’23.
Other highlights:
1. Crude steel production stable q-o-q: JSW Steel’s standalone crude steel output stood at 5 mnt in Q1FY’23, up 22% y-o-y compared with 4.10 mnt in Q1FY’22. Flat steel production stood at 3.60 mnt while long steel output stood at 1.04 mnt in Q1. However, production remained stable on q-o-q basis contrasted with Q4FY’22 due to preponement of maintenance shutdowns.
2. Capacity utilisation down 5% q-o-q: The company’s capacity utilisation stood at 93% in Q1 compared with 98% in the previous quarter. Also, the ramping up of Dolvi phase II expansion will drive growth in volume as demand recovers in the coming quarters.
3. Steel sales down 21% q-o-q: The company achieved steel sales of 4.03 mnt in Q1, down 21% q-o-q as against 5.11 mnt in the previous quarter. However, sales rose 12% y-o-y compared with 3.61 mnt in Q1FY’22.
4. Exports drop 26% q-o-q: The company’s exports registered a steep fall of 26% q-o-q due to the imposition of 15% duty in May.
5. Operating EBITDA falls by 51% q-o-q: The company posted an operating EBITDA of INR 3,352 crore in Q1FY’23, down 51% q-o-q. EBITDA declined by 65% y-o-y compared to INR 9,491 crore in Q1FY’22.
6. Coking coal guidance for Q2: Average coking coal prices are likely to see a reduction of $50-60/t in Q2 versus the average of $421/t CNF India in Q1.
7. Auto contracts: Some of the long products auto contracts are closed and some contracts are to close in the near term. For Q1, some steel majors have given an increase of INR 9,000/t, while for Q2 a drop of INR 4,000/t has been suggested.
8. Power cost likely to moderate: The cost of coal is likely to be reflected in the company’s books going forward as JSW continues to source from Russia. Hence, power costs are expected to moderate in the near future.
Outlook
The steel major is expecting steel consumption to improve in the coming quarter compared with Q1.
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