India: JSW Steel eyes 23.6 mnt of crude steel output, 22.6 mnt of sales in FY'23

Indian steel major JSW Steel expects to achieve 23.6 million tonnes (mnt) of crude steel production (including Bhushan Power and Steel Ltd and excluding overseas and JSW Ispat) and 22.6 mnt of steel sales in the current financial year (FY'23).

The company told in its investors call held on 20 January 2023 that it has achieved 17.25 mnt of crude steel production and 15.51 mnt of sales in the first nine months of FY'23 (April-December, 2022).

The impact of depreciating Indian Rupee (INR) and inventory losses continued to weigh on the company's performance in Q3FY'23, SteelMint understands.

Highlights-

1. Crude steel production up q-o-q: JSW Steel's standalone crude steel output stood at 5.32 mnt in Q3FY'23, up 7% q-o-q compared with 4.95 mnt in Q2FY'23, majorly due to ramp-up at Dolvi phase-II expansion which achieved 85% capacity utilisation against 80% in the last quarter. Flat steel production stood at 3.89 mnt while long steel output stood at 1.17 mnt in the quarter.

Steel plants operated with average capacity utilisation of 93% in Q3 while BPSL's capacity utilisation improved to 85% against 72% seen in Q2.

Production rose by 21% y-o-y in Q3FY'23 as against 4.41 mnt in Q3FY'22.

2. Steel sales edge down q-o-q: Steel sales edged down by 1% q-o-q to 4.95 mnt in Q3, against 5.01 mnt in the last quarter. However, on a y-o-y basis, sales registered a 24% growth from 4 mnt in Q3FY'22. Exports volumes in Q3FY'23 stood at 383,000 t (7% of the sales).

3. Operating EBITDA surges 131% q-o-q: The company posted an operating EBITDA of INR 4,030 crore in Q3FY'23, up 131% q-o-q. EBITDA was down by 41% y-o-y against INR 6,797 crores in Q3FY'22.

4. Update on PLI Scheme: The company has got the clearance for 9 projects (INR 16,751 crores investment) under the PLI scheme, out of which 6 projects (INR 5,350 crores) are under implementation. The remaining 3 projects will have capital expenditure of around INR 9,000 crores.

5. Net sales realisation (NSR) drops q-o-q: The company's NSR dropped by 5% q-o-q and costs have also reduced by around 14% as power costs were down and coking coal prices came down by around $100/t in consumption terms against company's guidance of $80/t reduction. Meanwhile, iron ore prices rose slightly q-o-q. Furthermore, steel major expects prices of iron ore and coking coal to remain range-bound in the last quarter of FY'23.

Realisations for hot-rolled coils (HRCs) fell by around INR 3,200/t q-o-q in Q3 due to the fall in global steel prices by $40-45/t.

6. Value addition to product mix: The company has made improvement to its product mix by commissioning 0.5 mnt countinuous annealing line (CAL) at Vasil, Tin plate-2 at Tarapur and LRPC unit at Vijayanagar in Q3. This will further add more volumes in the upcoming quarters and good performance from coated products with the removal of export tax is also expected.

7. Higher inventories: The inventory levels held by the company went up by 1,80,000 t to 2.039 mnt in Q3FY'23. Furthermore, the company aims to reduce the inventory levels and sees better export opportunity with improved export realisations as the duty has been removed by the Indian government in November 2022.

India's steel imports witnessed a sharp rise of around 47% q-o-q in Q3 and 40% y-o-y in April-December 2022. Export volumes saw a fall of 27% q-o-q in Q3.

Projects and company updates-

• The Brownfield expansion of 5 mnt at Vijayanagar works is under progress and is expected to be completed by end of FY'24.
  
  
• The phase-II expansion at Bhushan Power and Steel Ltd (BPSL) to 5 mnt remains on track and expected to be completed by FY'24.
  
  
• 1.5 mntpa coke oven plant battery A was commissioned at Vijayanagar and 60 MW power plant comissioned at Dolvi works.
  
  
• Downstream projects: 0.25 mntpa colour coating line at Rajpura to be commissioned by Q4FY'23 and 0.12 mntpa colour coating line in Jammu and Kashmir to be commissioned in FY'24.
  
  
• The company's capex spend in Q3FY'23 was INR 4,114 crores and INR 10,707 crores in April-December 2022 against the revised planned capex of INR 15,000 crores for FY'23.
  
  

Outlook for Q4FY'23
The company sees better steel demand from major consuming industries in Q4. It aims to reduce inventory levels in the coming quarter.