Indian primary mills’ Q4 pressured by inflation

• Q4 crude steel production up moderately
• Sales show upwards graph, pulled up by exports
• EBIDTA impacted by higher cost push

Morning Brief: Domestic demand has been a tad subdued while mills’ operating expenses have risen due to high coking coal and crude oil prices and power tariffs, an impact of the Russia-Ukraine conflict.

Global steel demand is expected to grow 0.4% in 2022 and by 2.2% in 2023 while India’s demand may increase 7.5% 2022 and 6% in 2023 as per worldsteel.

However, the last quarter of FY22 was challenging. Crude steel production for mills rose nominally q-o-q while remained muted. Exports offered a safety valve, fetching higher margins in FY22, especially from Europe.

• Crude steel production

Tata Steel: This steel major’s crude steel production inched up 2% to 4.90 million tonnes (mnt) in Q4FY 2021-2022 (Q4FY22) as against 4.81 mnt in Q3FY22. For the full fiscal of FY22, output moved up 13% to 19.07 mnt against 16.93 mnt in FY21. Volumes rose 3% in Q4FY22 against 4.75 mnt in Q4FY21. The company said it achieved the highest-ever annual crude steel production of 19.07 mnt in FY22.

JSW Steel: Crude steel production of this integrated major in Q4FY22 rose 14% to 5.01 mnt q-o-q, compared to 4.41 mnt in Q3FY22. For the entire financial year, crude steel output rose almost 17% to 17.62 mnt against 15.08 mnt in the previous fiscal. Y-o-y Q4 volumes were up almost 20% against 4.19 mnt in Q4FY21.

SAIL: This public sector behemoth reported crude steel production of 4.60 mn t in Q4FY22 compared to 4.53 mnt in Q3, inching up 2% in a quarter that was challenging in terms of demand. Total crude steel output in FY22 was at 17.37 mnt against 15.22 mnt in FY21. SAIL’s production through the blast furnace route comprises almost 99%, with the remaining via EAF. Q4FY21 output was slightly lower at 4.56 mnt compared to Q4.

JSPL: Jindal Steel and Power Limited (JSPL) recorded Q4FY22 crude steel production at 2.11 mnt, up 8% q-o-q compared 1.96 mnt in Q3. Quarter-wise, this was the highest volume recorded in the last two years tracked by SteelMint. Total production in FY22 increased 7% to 8.01 mnt against 7.51 mnt in FY21. Y-o-y, Q4’s output inched up 2% against 2.07 mnt in Q4FY21.

*AM/NS: Integrated steelmaker ArcelorMittal Nippon Steel (AM/NS) India recorded a 8% drop in crude steel production in Q4FY22, to 1.73 mnt q-o-q against 1.87 mnt in the previous quarter. Total production in FY22, however, increased 9% to 7.32 mnt against 6.71 mnt in FY21. On a y-o-y basis, production dropped 5% against 1.82 mnt in Q4FY21.

• Sales

Tata Steel: The steel major reported a 16% q-o-q growth in sales. Sales volumes touched 5.12 mnt in Q4FY22 compared to 4.42 mnt in Q3FY22. Total sales in FY22 rose 6% to 18.27 mnt against 17.30 mnt in FY21. Y-o-y, Q4 sales were up 10% compared to 4.67 mnt in Q4FY21. The company said it saw broad-based improvement in sales volumes across segments. Automotive sales were up 27% y-o-y while branded products, retail sales and industrial products and projects all rose 11% y-o-y.

JSW Steel: Saleable steel sales were at 5.1 mnt, up 28% q-o-q compared to 4 mnt in the previous quarter. Total sales in FY22 rose 11% to 16.51 mnt against 14.88 mnt in FY21 while, y-o-y, Q4 sales were up 26% compared to 4.06 mnt in Q4FY21. The company said it posted the highest-ever sales volume in Q4FY22, driven by ramped-up production and healthy demand. Its domestic sales were the highest-ever, up 30% q-o-q. Annually, sales to auto segment was up 23% and to solar segment by 104% and appliances, up 39%.

SAIL: Saleable steel sales touched 4.71 mnt in Q4FY22 against 3.84 mnt in Q3, up 23% q-o-q, despite an overall sluggish demand scenario. In line with SAIL’s guidance, its total sales in FY22 touched 16.16 mnt. Last fiscal, total saleable steel touched 10.80 mnt minus the Q3 figure.

Q4 sales were up 8% against 4.35 mnt seen in Q4FY21.

JSPL: During Q4FY22, the steel major, on a standalone basis, reported its highest-ever quarterly sales (including pig iron) at 2.08 mnt, up 14% q-o-q as against 1.82 mnt in the previous quarter. However, total sales in FY22 dropped 5% to 7.27 mnt against 7.64 mnt in FY21. On a y-o-y basis, Q4 sales were up 9% compared to 1.91 mnt in Q4FY21. The company reported 65% y-o-y drop in Q4FY22 net profit.

*AM/NS India: Steel sales volumes remained flat q-o-q at 1.73 mnt in Q4FY22. Y-o-y, volumes were up a marginal 1% against 1.71 mnt in Q4FY21. In the entire fiscal FY22, total sales rose 7% to 6.95 mnt against 6.50 mnt in FY21.

• EBITDA

The company said it recorded the highest-ever consolidated EBIDTA of INR 63,830 crore with an EBIDTA per tonne of INR 21,626. Profit for Q4 rose 47% y-o-y to INR 9,756 crore.

JSW Steel: The operating EBIDTA touched INR 6,907 crore, down marginally q-o-q compared to INR 6,797 crore in Q3FY22. Total EBIDTA for FY22 touched INR 31,868 crore. Q4FY figure was lower than Q4FY21’s INR 8,021 crore. The Q4 PAT declined 20% to INR 3,343 crore.

SAIL: The PSU major reported an EBIDTA of INR 4,783 crore in Q4 against INR 3,659 crore in Q3 and INR 6,473 crore in Q4FY21. Total EBIDTA for FY22 touched INR 22,364 crore. Q4 could not be insulated from the unprecedented rise in input costs, especially imported coking coal. Its Q4 consolidated net profit fell 28% to INR 2,478.82 crore due to higher expenses.

JSPL: The EBITDA declined by around 11% to INR 2,827 crore in Q4FY22 in comparison to INR 3,168 crore in Q3 and by 42% against INR 4884 crore in the same quarter of previous fiscal. In FY22, EBIDTA touched INR 15,038 crore.

*AM/NS India: The company reported an operating profit (EBITDA) of $470 million in Q4, which fell sequentially from $435 million in Q3. The company reported a 17% y-o-y growth in EBIDTA for quarter ending 31 March, 2022.

Outlook
With the government slapping the 15% steel export tax, India’s primary mills, which have been major exporters, have gone on the backfoot. While prices may cool down further, domestic demand is expected to subdued, especially for construction steel, which comprises almost 60% of the market, because of the approaching monsoons. Hence, mills may have to explore exports once EU quotas are available, the export tax notwithstanding.

*Although numbers are given fiscal year-wise, AM/NS India follows the calendar year.