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India is a bright spot for demand and supply of steel; but globally, things remain highly volatile: MD, JSPL


Jindal Steel and Power Ltd (JSPL), among the top steel makers in India, saw export volumes drop to 11 per cent of sales in Q2 FY23 (26 per cent in Q1) as a consequence of export duty and weakened global demand. However, during the quarter, it witnessed improved domestic demand, said Bimlendra Jha, Managing Director, JSPL.

According to him, India continues to be a bright spot in terms of steel demand and consumption as compared to global scenario, which remains volatile.

What is the outlook for the steel industry – both domestic and overseas – in the current backdrop of weakening demand?

India moves to a different drumbeat compared to the rest of the world. Right now, we are the only country to have witnessed growth in demand for steel. In the current year, we will end up with 121 million tonnes (mt) of steel production as against 113 mt last year or 106 mt the year before. In India, people are returning to markets post the festive season and so, we are entering that positive territory of demand.

Global steel production is expected to be up to 1814 mt, as compared to 1796 mt last year. This means 18 mt growth, and of that 8 mt would be coming from India.

The energy crisis is having an impact in Europe both from the demand and supply side. So, the situation is tough in there. Global inflationary risks cannot be ruled out either.

So, India is a bright spot both from a demand and supply perspective. But globally, things remain highly volatile and uncertain.

What is the price movement trend?

The troughs will not be as deep as the previous cycles. In the underlying raw material prices, we have started seeing a bit of firmness. Coking coal prices are firming up to $320 / tonne levels. As of now, iron ore and coal prices are moving in opposite directions. For domestic steel prices, the minimum we expect is stability and then a rise, unless something drastic happens.

See, India is neither exporting (huge quantities) nor importing much. There is little likelihood of imports shooting up as everyone is bringing down capacities. A lot of destocking happened when prices were high. Hence, the ability of the consumer to hold back their demand has gone down. Also, Q4 is historically a strong one, in terms of placing of orders. So, these are conducive to demand and price.

E xport duty has hit your numbers. What is the way forward?

Greater impact of the export duty levy has come for iron ore; particularly, the pellets that we could have sold like earlier. With the 50 per cent duty (on iron ore exports), we have lost the opportunity. Hence, we had substantially lower numbers only on account of iron ore. Whereas on steel, because of the strong domestic demand, firmness of price, and the variety of our offerings, we continue to be in a position to evaluate opportunities.

Are realisations better for domestic market?

At the moment, domestic realisations and margins are better than export markets. At 15 per cent export duty on steel, it is not becoming remunerative to sale overseas.

Some of our products are not blocked by the duty and we are free to export, provided it makes sense economically. It’s not so much about whether the export slowdown is hurting us badly, but whether prices have moved.

If we were accumulating inventories, we could have said that we were being hit by the duty levy. But, we liquidated a lot of stock in Q2 as compared to Q1. That means, as far as a pull for our products is there, we do not have a problem. It is more of where do we want to sell.

C oal availability and high costs have been a recurring issue. How is that being worked?

More than coal availability, it is rake availability that is a problem in India. It is the speed at which the material can move that matters. It is time we seriously look at the speed of these rakes – where the average speed is 10 km / hr.

Steel plants are not just consumers of power, they are producers of power too. Once that is not considered and policies are made to prioritise supplies to the power sector only, it causes unnecessary disruptions. Some of these structural changes needs to be looked into.

For JSPL, nearly 50 per cent of its requirements are met from group resources.

When will your make operations your four mines – Utkal C, Utkal B1, Utkal B2 and Gare Palma IV/6? 

These mines are a source of competitive advantage for us. We want to start them as soon as possible. And if there are no red flags, we are hopeful of starting them in Q4FY23. As we continue to ramp up, we will try to get to 50 per cent of our thermal coal requirements from these mines. And increase this further over a period of time.



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Published on November 13, 2022


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