India: JSW Steel FY'22 highlights

Steel major JSW Steel announced its production and sales guidance for FY2022-23 (FY23). It plans to produce 23.6 million tonnes (mnt) of crude steel, and is targeting around 22.6 mnt of sales of steel during the fiscal, SteelMint learned from the company's investor call held on 27 May 2022.

India's steel demand is expected to witness a steady growth of 7.5% in FY23 from 106 mnt in FY22. The government's announcement on infrastructure and construction projects will support steel consumption of 20 mnt over the next three years.

Update on projects

• Brownfield expansion of 5 mnt at Vijayanagar works is under progress, and is expected to be completed by FY2024.
  
  
• The downstream projects at Vasind and Tarapur works are to be completed in the first quarter of FY2023.
  
  
• The expansion of BPSL to 3.5 mnt is expected to be completed by September 2022, and further expansion to 5 mnt shall be completed by FY2024.
  
  

Other highlights

1. Highest-ever crude steel production in FY22: JSW Steel recorded the highest-ever crude steel production of 17.62 mnt in FY2022, up 17% against 15.08 mnt in FY2021 despite supply chain disruptions amidst Russia-Ukraine issues. On a quarterly basis, production rose by 14% to 5.01 mnt, compared to 4.41 mnt in the previous quarter.

2. Capacity utilization at 94% in FY'22: The company achieved an average capacity utilization of 94% in FY22. Also, the ramping up of Dolvi phase II expansion supported the capacity utilisation from standalone operations to reach 98% in Q4 FY2022, as against 94% in Q3.

3. Steel sales up y-o-y in FY'22: The steel major posted the highest-ever saleable steel sales of 16.52 mnt in FY2022, up by 11% compared to 14.88 mnt in FY2021. The same increased by 28% q-o-q to 5.11 mnt in Q4 from 4 mnt in Q3.

4. Export volumes up y-o-y in FY'22: Steel exports registered an increase of 8% y-o-y to 4.57 mnt (28% of total sales), excluding BPSL in FY2022. In Q4, exports stood at 0.87 mnt against 0.84 mnt in the previous quarter.

Moreover, the company expects exports to be in the range of 15-20% of the total steel sales in FY2023.

5. Operating EBITDA up by 65%: The steel major achieved the highest-ever annual operating EBITDA of INR 31,868 crore in FY2022, up 65% y-o-y as compared to INR 19,259 crores in FY2021.

6. Inventory levels down in Q4: JSW Steel disclosed that inventory levels fell by 3,86,000 t in Q4FY2022 in the investors' call held on 27 May.

7. Ramping up iron ore capacity: The company gave an update on ramping up of iron ore capacity at Karnataka and Odisha. In addition, 53% of iron ore will be sourced from captive mines next year, SteelMint learnt from the investors' call. The company expects Indian iron ore prices to soften in the near term.

8. Auto contracts: JSW Steel has finalised the auto contracts with some of the major automakers, concluding these between INR 11,500-12,000/t. The contracts with other automakers are yet to be concluded.

9. Impact of coal prices: Impact of coking coal from Q3 to Q4FY2022 increased by about $52/t, pushing the prices to $308/t CNF during the same period. For Q1FY2023, an impact of $100-125/t is expected as coking coal prices have sky-rocketed.

10. Outlook on steel prices: Indian steel prices are likely to see further correction in June. It is to be noted that towards the beginning of May, mills had lowered prices by around INR 2,000-3,000/t.