‘Lower input cost to offset impact of low steel prices’

livemint.com:

Edited excerpts: What’s your view on JSW Steel’s Q1 performance amid challenges posed by declining steel prices and rising coal costs? In Q1, JSW Steel did fairly well. Higher coal costs seen in February-March came into cost structure during Q1. Coking coal prices rose by $11 a tonne over Q4, and we were able to mitigate that through a better blend.

Iron ore costs, too, were higher, but we handled it through a better product mix. Value-added component increased to 61% in our sales. Furthermore, slightly higher priced export orders booked in Q4 and executed in Q1 helped.

Hence, better realizations mitigated the cost impact and Ebitda per tonne improved to ₹12,345 in the first quarter from ₹12,151 seen in Q4. Volumes fell as the channel destocked on fall in prices. Weather disruptions led to inventory build-up at ports as vessels got delayed.

However, we should be able to liquidate the inventories in ensuing quarters. India is still a good growth story. This year we expect incremental steel demand of 10-11 million tonne and overall steel demand should exceed 20-130 mt.

How will steel demand in China and pricing influence prospects of steel manufacturers, hereon? Production in China increased but was not backed by domestic demand. Manufacturing, real estate demand were weak. Exports from China rose.

However, some regions announced they will be moderating production in line with the Chinese government’s directive of capping production to last year’s (2022) levels. That means China production will continue to go down by 10 MT each month assuming it was to meet that number. This should be positive for the steel industry at large.