India: JSW Steel's production, sales increase q-o-q in Q2FY'25

• Capacities at BPSL, Vijayanagar expanded
  
  
• FY'25 capex reduced by up to INR 4,000 cr
  
  

The standalone entity of Indian steel major JSW Steel reported a q-o-q rise of 9% and 4% in crude steel production and sales, respectively, in the second quarter of financial year 2024-25 (Q2FY'25).

FY'25 capex projections trimmed

The capex spent during the quarter was at INR 3,384 crore, with the total for H1FY'25 at INR 7,850 crore. The annual capital expenditure has been revised downward from INR 20,000 crore to INR 16,000-17,000 crore. This adjustment is primarily due to the transfer of the slurry pipeline to JSW Infrastructure and the rescheduling of the BF3 shutdown at the Vijayanagar facility to H1FY'25, following the stabilisation of BF5.

Capacity expansion underway

The company successfully commissioned a 1 million tonne per annum (mtpa) expansion at BPSL, increasing its overall capacity to 4.5 mtpa.

Additionally, an increment in production is expected from Q3FY'25 at JVML Vijayanagar. The company commissioned a sintering plant at Vijayanagar in March 2024, followed by a blast furnace and related facilities in late September. The steel melting shop there is currently undergoing commissioning, with a ramp-up expected by Q4FY'25.

Besides expanding steelmaking capacity, the company is focused on strengthening its downstream capabilities, with the strategic goal of increasing the proportion of value-added and special products in total sales to over 50%.

To boost raw material security in Karnataka, the company increased its iron ore mining capacity for existing captive mines from 7 mtpa to 11 mtpa, with an expected production of approximately 10 mtpa in FY'25. Of the three new mines planned in Karnataka, two are expected to be commissioned in Q4FY'25, while the third will likely be operational by Q1FY'26. These developments will elevate the company's captive mining capacity in Karnataka to 15.5 mtpa.

In Goa, the public hearing for one of the mines has been completed, and the company is working towards initiating mining operations within the next 3-6 months, with a capacity of 0.5 mtpa. Additionally, BPSL's Netramanda mine in Odisha is also projected to commence production in the next 3-6 months, with an estimated capacity of 2 mtpa.

Performance highlights

Crude steel production increases q-o-q: JSW Steel reported a 9% increase in standalone crude steel production to 5.77 mnt in Q2FY'25 compared to 5.3 mnt in the previous quarter. The company's average capacity utilisation during the quarter was 91%, up from 87% in the previous quarter. Additionally, production grew 7% from 5.4 mnt in Q2FY'24.

Enhanced production is expected in H2FY'25, following the expanded capacities at BPSL and Vijayanagar. The company is maintaining its volume guidance of 28.4 mnt for production and 27 mnt for sales in FY'25.

A five-month shutdown of BF3 at Vijayanagar will be undertaken for capacity enhancement, following the stabilisation of the new blast furnace at JVML, expected to occur in FY'26. The BF3 shutdown is scheduled for Q3FY'25.

Steel sales rise q-o-q: The company's sales witnessed a rise of 4% to 5.3 mnt in Q2FY'25 against 5.09 mnt in the previous quarter. However, sales fell 2% from 5.41 mnt in Q2FY'24. A sharp decline in exports due to weak global markets impacted sales volume.

Domestic sales touched an all-time high, growing by 5% q-o-q and 1% y-o-y in H1FY'25, supported by strong steel demand in the country. The company achieved its highest quarterly sales to institutional segments, with a 12% increase y-o-y. Sales to the solar segment also saw a significant growth of 50%.

Operating EBITDA grows q-o-q: The company's operating EBITDA grew 9% to INR 4,641 crores in Q2FY'25 against INR 4,275 crore in Q1FY'25. The same declined by 33% from INR 6,898 crore in the CPLY.

Steel prices rise, NSR declines q-o-q: During Q2FY'25, net sales realisation (NSR) decreased by just over INR 3,000/t q-o-q. Domestic steel prices, having bottomed out in September, experienced increases in October for both long and flat products.

JSW Steel's performance is expected to improve in H2FY'25, with new volumes from expanded capacities contributing to a more favourable pricing environment.

Value-added product mix: Sales of value-added steel products (VASP) were recorded at 60% for the quarter, primarily due to exports falling by 35% y-o-y. Domestic sales increased by 7% y-o-y to 10.88 mnt, the highest half-yearly domestic sales to date.

Lower coking coal costs: Coking coal costs decreased by $2/t in the quarter, aligning with the previously set guidance. The company expects further benefits from lower coking coal and iron ore prices in the next quarter.

Note: All the figures are for JSW Steel's standalone entity.