India: JSPL Q3FY'22 takeaways

Jindal Steel and Power Ltd (JSPL) is optimistic about achieving its annual steel production of about 8-8.05 mnt and sales of around 7.9-8 mnt. Furthermore, steel major shall maintain their export target of around 28-30% over robust demand, SteelMint learned from the company's investor call held today.

JSPL expects oil and gas prices along with coal to cool down during Mar-Apr.

Steel production up 2% in the quarter: JSPL's steel production stood at 1.96 mnt in Q3FY'22, up by 2% q-o-q and y-o-y against 1.93 mnt in Q2FY'22 and Q3FY'21.

During 9MFY'22, production volumes stood at 5.90 mn t, an increase of 30% against 5.43 mnt seen in the corresponding period last year.

Sales down 15% q-o-q in Q3: Steel sales aggregated to 1.82 mnt in Q3, down 15% as against 2.13 mnt in the previous quarter. On an annualised basis, the same went down by 3% compared to 1.87 mnt in Q3FY'21.

In 9MFY'22, steel sales jumped 4% to 5.56 mnt in comparison with 5.36 mnt in the same period last year.

Company's EBITDA down 30%: The EBITDA dropped by around 30% to INR 3,168 crore in Q3FY'22 against INR 4,519 crore in Q2. Similarly, on a y-o-y basis EBITDA edged down 19% compared to INR 3,908 crore in Q3FY'21.

Increase in inventory levels: Inventory levels rise due to unavailability of rakes and logistical barriers such as availability of trucks and trailers.

Shortage of steel: The Government of India is trying to encourage a recycling economy, however because of the availability of iron ore and scrap has become an issue which in turn has created a shortage. For instance, Scrap prices in Turkey have reached $500/t levels which means by the time it reaches India it would be around $560-575/t levels. Therefore, steel generated through scrap routes would account for INR 50,000-51,000/t, which is highly abnormal. Shortage of scrap worldwide is majorly due to snowfall in major parts of Europe and America along with outbreak of covid. Moreover, to reduce carbon emissions mills have opted steelmaking through the EAF route.

Market dynamics: In Nov'21 demand for steel was good. However, in Dec'21 due to Omicron and lockdowns coupled with rains in southern India steel demand saw a downtrend. MSME's and others slowed their purchases anticipating that if the government implements a lockdown, labour issues will rise.

Steel prices: Long steel prices have jumped to INR 60,000/t levels as on today (landed 63,000 pan India) from as low as INR 50,000/t during Jan. HRCs have gained their momentum at INR 66,000-67000/t levels in Mumbai, Delhi and Chennai as on today compared to INR 66,000/t levels seen in Nov'21. HRC prices were seen as low as INR 63,000/t levels during Jan.