India: JSW Steel's crude steel output increases, sales decline q-o-q in Q3FY24

Indian private steel major, JSW Steel's, crude steel production increased, while the sales volumes declined q-o-q in Q3FY24, BigMint learnt from company's investors call held on 25 January 2024.

During the third quarter of the fiscal year 2024, the company allocated INR 5,103 crores for capital expenditures within India. Accumulatively, for the first nine months of the fiscal year 2024, capital expenditures within India amounted to INR 12,898 crores.

Update on projects-

a) Vijaynagar

• The ongoing 5 MTPA Brownfield Project is currently in full swing with construction activities in progress for all packages.
  
  
• The blast furnace (BF) is nearing completion, while equipment erection and piping work are at an advanced stage.
  
  
• In the steel melting shop (SMS), the first converter and caster equipment erection have been successfully completed.
  
  
• In the hot strip mill (HSM), all mill stands have been erected, and trial runs are scheduled to commence.
  
  
• The commissioning of the project is set to initiate progressively starting from the fourth quarter of the fiscal year 2024.
  
  

b) Bhushan Power & Steel Limited's (BPSL) phase-II expansion (3.5 to 5 mtpa):

Odisha:

• The DRI conveyor, Zero Power Furnace, Caster, and associated facilities within SMS-2 have been successfully commissioned.
  
  
• The commissioning of Wire Rod Mill-2 and Lime Calcination Plant-6 is scheduled for the fourth quarter of the fiscal year 2024.
  
  

Jammu and Kashmir:

• The civil and structural work for the 0.12 MTPA Colour Coating line in Jammu & Kashmir has been successfully completed, with the ongoing progress of equipment erection.
  
  
• The commissioning phase is scheduled to commence in the first quarter of the fiscal year 2025.
  
  

Other highlights

Crude steel production increases q-o-q: The company's standalone crude steel output stood at 6.63 million tonnes (mnt) in Q3FY24, up 7% q-o-q from 6.2 mnt in Q2FY24. However, the same rose by 9% y-o-y compared with 6.06 mnt in Q3FY23.

The capacity utilisation at Indian operations reached 94% in the current quarter, showcasing a notable increase from the 89% recorded in Q2 FY24. This improvement is attributed to the successful navigation of maintenance shutdowns that impacted our operations in the preceding quarter.

Steel sales fall q-o-q: Steel sales recorded 6% fall on q-o-q basis to 5.82 mnt in Q3FY24 against 6.18 mnt in Q2FY24. Domestic sales climbed 2% y-o-y, propelled by a 12% surge in OEM and industrial segments. Value-Added and Special Products (VASP), enjoyed a healthy 17% y-o-y volume growth, driven by a 20% surge in OEM and industrial sales, even as retail sales dipped 2% y-o-y.

The company achieved its highest ever quarterly sales in both the auto and renewable energy segment, with impressive y-o-y increases of 16% and 31%, respectively.

Operating EBITDA declines q-o-q: The company's operating Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) was recorded at INR 6,923 crores in Q3FY24, lower by 10% on q-o-q basis against INR 7,734 crores in Q2FY24. However, it grew by 56% q-o-q basis from INR 4,448 crores.

Increased operating costs: The performance of Indian operations witnessed a negative impact on a quarter-on-quarter basis, primarily attributed to the escalation in iron ore prices and increased coking coal costs.

Notably, there was a q-o-q rise of $21/t in coking coal costs during Q3FY24, which is closer to the guidance range of $25-30/t. This variance can be attributed to the utilisation of superior blends. The landed cost of cooking coal was $250/t CFR. Looking ahead, the company foresees a further increase in coking coal prices by $25/t in the forthcoming quarter.

To enhance self-sufficiency in iron ore, the company is actively engaged in expanding the capacities of its existing mines. Additionally, efforts are underway to secure clearances for three new mines in Karnataka. On a positive note, the company has successfully obtained enhanced environmental clearances for its mining operations in Odisha and is poised to commence activities in that region shortly.

Note: All Figures mentioned are for JSW Steel standalone + Indian subsidiaries