India's tier-1 mills report higher production, sales in FY'24; optimistic on Q1FY'25

• Higher consumption y-o-y nudges up production
  
  
• EBIDTA up on lower coal costs, value-added focus
  
  
• Further drop in coking coal prices likely in Q1FY'25
  
  

Morning Brief: India's tier-1 mills put up a fairly good show in financial year 2023-24 (FY'24). Crude steel production increased for a majority of them, as did sales. The EBIDTA per tonne was also robust for the full year amid declined raw material costs, especially coking coal. BigMint takes a look:

Production rises amid good domestic demand

A majority of the tier-1 mills put up a good show in terms of production in financial year 2023-24 (FY'24) since demand was overall good compared to the rest of the world. JPC data reveals that consumption in FY'24 improved around 14% to 126 million tonnes (mnt) compared to 110 mnt in FY'23.

Indian steel mills' average India capacity utilisation was at 92% in FY'24, and at 93% in Q4FY'24.

Demand especially from the projects segment (on the back of the government's infrastructure push), housing construction and automotive increased. Thus, Indian mills took advantage of the home demand to keep the production levels higher y-o-y.

India's largest steel producer in the private sector, JSW Steel, reported an 8% increase in crude steel production at 22.25 mnt while Tata Steel achieved the highest-ever crude steel output volume of 20.8 mnt in FY'24, showing a y-o-y growth of 4.5%.

Public sector steel major Steel Authority of India Limited (SAIL) posted a 5% y-o-y growth in output at 19.2 mnt.

However, Jindal Steel & Power (JSPL)'s output remained stable, up a minuscule 0.5% to 7.93 mnt. Flats steel major AM/NS India also reported an almost flat growth, rising 1% to 7.68 mnt.

Higher consumption translates into increased sales

With the demand momentum decently strong, mills were able to notch up good sales last fiscal. JSW Steel witnessed an 8% y-o-y increase in saleable steel sales to 21.13 mnt. Tata Steel saw its volumes rising 5.6% to 19.9 mnt.

SAIL's saleable steel sales rose 6% to 17.10 mnt.

JSPL's, in FY'24, remained flat even though volumes fell a slight 1% y-o-y in Q4FY'24.

AM/NS India posted a 13% increase to 7.44 mnt last fiscal.

Lower coking coal costs, value-added focus boost EBIDTA

Where the earnings before interest, depreciation and amortization (EBIDTA) performance per tonne was concerned, all three private sector majors reported a decline in Q4FY'24. However, for the full financial year, the EBIDTA recouped for all.

JSW Steel's EBIDTA per tonne (t) in FY'24 rose a significant 33% to INR 10,402/t ($125/t) and Tata Steel's by a moderate 5% to INR 15,600/t ($187/t).

SAIL, on the other hand, saw a considerable 25% increase to INR 7,224/t ($87/t) while JSPL's rose 6% to INR 13,336/t ($160/t).

Although prices of both benchmarked hot rolled coils and rebars fell steadily last fiscal, coking coal (premium HCC) prices fell almost 11% y-o-y which helped to shore up the EBIDTA.

For JSW Steel, in particular, retail and value-added sales rose. The percentage of value-added products rose in Q4FY'24 to 62% from 60% in Q4FY'23.

Tata Steel reported a material cost decline of INR 6,000/t ($72/t) owing to lower coking coal costs and lesser purchases of pellets from outside. Its branded products sales also rose in FY'24.

SAIL's net sales realisation (NSR) for finished longs products stood at around INR 55,400/t ($663/t) in Q4 compared to the previous quarter's INR 54,000/t ($647/t). The NSR for finished flat products, however, dropped to around INR 53,700/t ($643/t) in Q4FY'24 against Q3's INR 56,600/t ($678/t).

At JSPL, with a lion's share of 61% in the company's total sales, the value-added specialty products (VASP) category recorded an annual increase of 19% in FY'24.

Outlook

Looking ahead, mills anticipate a further decrease in coking coal prices, especially in Q1FY'25, by $10-40/t which can shore up their bottomline.

A positive demand outlook is also expected now that the general elections are over and the country will soon have a stable government in place. Such an unfolding scenario makes mills upbeat on inventory reductions and improvement in net sales realisations in Q1FY'25 as compared to the previous quarter.