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Govt’s Duty Rollback Decision May Not Benefit Steelmakers: Experts

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Also, the industry is concerned about any major uptick in the steel prices that may make the government reconsider export duties. During May, in this year, the duties were introduced when the global along with Indian steel prices reached a record high which enabled lucrative export opportunities

According to the industry experts, the decision taken by the government to cut export duties on ferrous and steel products may not serve any significant boost to the listed steelmakers of the country. The reasons quoted is global demand for steel that has collapsed, limiting the export opportunities.

Also, the industry is concerned about any major uptick in the steel prices that may make the government reconsider export duties, said experts.

However, what analysts think that the duty rollback may result in some sentimental boost and the marginally revised price targets may witness upwards trend nearly by 10 per cent to 15 per cent across steel companies like JSW Steel, Jindal Steel and Power.

Also, the low inventory in the system may serve a near-term support.

The shares of Tata Steel and SAIL in terms of price targets have not witnessed any significant alterations after the rollback of export duty.

During May, in this year, the duties were introduced when the global along with Indian steel prices reached a record high which enabled lucrative export opportunities. The situation, however, has changed drastically since then.

The World Steel Association (WSA) has reduced its 2022 and 2023 demand estimates across all regions along with India. The only exceptions to this are the Middle East and Africa.

The new global steel demand growth estimates have been altered to 2.2 per cent, keeping it down for 2022. Expectedly, demand may witness a downfall in Europe and the UK, where Tata Steel has a large exposure with the help of its European operations.

The prices of steel in India during May (hot rolled coil) were more than Rs 70,000 per tonne and the steel prices in Europe were nearly 1,000 dollar (Rs 77,000 approximately) per tonne.

The reasons behind export opportunities and higher volumes for domestic steel producers were premiums in the overseas markets.

In contrast, presently, the prices in India are at Rs.55,000 per tonne, which is down between 20 to 22 per cent. The European steel prices, however, went down by more than 40 per cent to 600 dollar (Rs. 49,000 per tonne approximately).

Further, the Chinese prices are also down 30 per cent in the period. Therefore, exporting steel maybe less beneficial for domestic producers, according to industry trackers.

The prices of shares of all four major steel producers being Tata Steel, JSW Steel, Jindal Steel and Power and SAIL on 18 November remained low as compared to their previous day’s close.

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JSW Steel Crude Steel Production Surges 25% To 1.76 Mn Tonne In Oct’22

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The crude steel output of the company stood at 14.25 LT (Lakh Tonne) in October 2021, said JSW Steel in a statement. Also, the output long rolled products was at 3.70 LT, which went up 11 per cent as compared to the year-ago period

The leading steel manufacturing JSW Steel recorded a 25 per cent surge in standalone crude steel production at 17.76 lakh tonne (LT) during October 2022, on 11 November.

The crude steel output of the company stood at 14.25 LT in October 2021, said JSW Steel in a statement.

The production of flat rolled products increased by 30 per cent to 13.61 LT from 10.45 LT during corresponding month in the last year.

Also, the output long rolled products was at 3.70 LT, which went up 11 per cent as compared to the year-ago period.

An improvement of 93 per cent was also witnessed in the capacity utilisation last month, from 89 per cent in September 2022.

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Entrepreneur Needs To Motivate Employees To Achieve Greater Heights: Rajesh Jain, JSWCPL

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Although, the endurance power in India has increased however, the new generation wants to work differently with proper guidance and education. India needs to consider and give importance to value engineering today, which in simple words means doing what needs to be done in a more productive way, said Rajesh Jain 

An entrepreneur needs to recognise and motivate its employees, staff and colleagues to reach greater heights, said JSWCPL’s vice-president, Rajesh Jain in an interview with BW Businessworld and BW CFO World. 

Jain said that today everyone is well aware of the entire world going through unforeseen circumstances. However, every such situation teaches us a life lesson, whether it be Covid-19 or the present recession. Although, the endurance power in India has increased however, the new generation wants to work differently with proper guidance and education. 

Along with the Corporate Social Responsibility (CSR), it is the entrepreneurs’ responsibility to recognise and motivate its employees, staff and colleagues. It builds trust and holds them alongside throughout the journey which takes the organisation to new heights, said Jain. 

He added, “Under the CSR activities, we run various projects for poor children, schools and it is Jindal’s vision that we are working upon and able to make the difference every year.” 

India needs to consider and give importance to value engineering today, which in simple words means doing what needs to be done in a more productive way, said Jain. 

Here are edited excerpts: 

How did JSWCPL react and helped its employees to cope up during pre and post Covid-19 pandemic? 

JSWCPL strongly believes that its employees are its assets and it is the moral responsibility of the management to be with them. In terms of Covid-19, during and after that period, we took all the precautionary measures, made all the vaccination and hospital facilities available and gave all the financial help to our employees to recover from the same. We also extended the services to our stakeholders, other local vendors and suppliers too.  

How has been company’s performance amidst global recession? 

The first half of the financial (H1) was not good. The current recession across the globe and the export duty of 15 per cent levied by the government has hampered the businesses. H1 in comparison with last year was not good and can say we are on the negative side. However, for H2 we have a full-fledged plan to recover.  

What are the recent developments in the company? 

JSW Steel being the holding company manufactures steel whereas, JSWCPL being the subsidiary operates in the steel processing part. We have gone for massive expansion at various units like one in Washim expanding from 0.5 to 2 million tonne (MT). In Tarapur, plant expanded from 0.8 to 1.2 MT production. The Kalmeshwar plant earlier used to have 0.5 to 0.6 MT, which we have reached to 1 MT, which is close to 80000 ton per month. 

Also, we have made various acquisitions in the recent past which includes VIL VTPL in Rajpura, Asian Bawal and Khapoli Plant, National Steel is in our portfolio too. So, starting with two units, now JSW Steel is operating in seven units. 

What is your message for budding entrepreneurs?  

The world stands with new entrepreneurs, they just need to have confidence in themselves. The coming time is for India and Indians. No matter where they will go in the world, their hard work, dedication, commitment and endurance will make way for them. 

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JSW Steel’s US Unit Raises 182 Million USD Debt For Texas Plant Upgradation

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The Italian government provided the Servizi Assicurativi del Commercio Estero (SACE) guarantee covering around 70 million dollar out of the total financing. The intention behind such move is promoting Italian exports. The announcement of investment came during the time when the World Steel Association made prediction that the steel demand in the US will not contract anytime during the year against other major consumers

JSW’s US unit raised 182 million dollar long-term debt for the upgradation of its plate mill in Baytown, Texas, from Italy’s Intesa Sanpaolo and Banco BPM. Nearly worth 100 million dollar of the equipment such as cutting line, rolling mill, grinding machine and water treatment system will be supplied by three Italian firms, to upgrade the facility.

The Italian government provided the Servizi Assicurativi del Commercio Estero (SACE) guarantee covering around 70 million dollar out of the total financing. The intention behind such move is promoting Italian exports. The remaining portion of capital is a term loan, said JSW Steel in a statement 27 October.

The shares of JSW Steel jumped 5.44 per cent closing at Rs. 679.45 on the BSE on 27 October showed the news after the benchmark Sensex ended 0.36 percent higher. JSW Steel holds significant operations in the USA and as well as Italy.

The announcement of investment came during the time when the World Steel Association made prediction that the steel demand in the US will not contract anytime during the year against other major consumers.

JSW Steel’s plate and pipe mill in the US recorded earnings before interest, tax, depreciation and amortisation (EBITDA) of 25 million dollar which went up by 88 per cent year-on-year. However, sequentially it was down in the previous quarter. On the other hand, the company’s Ohio unit reported loss of 40 million dollar EBITDA after sales halved.

economy

CFOs Reviewing Capex Plans Amid Global Growth Worries

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The RBI is cutting down its growth forecast 7 per cent from its previous projection of 7.2 per cent for the current financial year. CFOs hold back further in the wake of slowing global growth.

With the continuing rise in interest rates in current year finance leaders in companies are reviewing their capital investments. The global demand environment too looks increasingly uncertain.

Reserve Bank of India (RBI) increased repo rates by 50 basis points, reaching to 5.9 per cent, in the last week. Since May 2022, rates have been hiked by 190 basis points to subdue inflation.

The RBI is cutting down its growth forecast 7 per cent from its previous projection of 7.2 per cent for the current financial year. CFOs hold back further in the wake of slowing global growth.

“Due to uncertain market environment capex hardly grew. We held back in the first quarter of this financial year. We will see how the demand plays out in the current and in the subsequent quarters as well. Inflation is still continuing to remain high, and most probably that interest rates will flatten in the near term. That is why we will keep on reviewing our investment plan,” said a CFO of large auto component maker with capex plans of around Rs 2,500 crore this fiscal.

JSW Steel being India’s top steel manufacturer, cut down its FY23 capex to Rs 15,000 crore from a budgeted Rs 20,000 earlier. However, Tata Steel being another leading steelmaker, is still moving forward with its Rs 12,000 crore FY23 outlay.

“Big corporates already have enough liquidity, hence yet to come to the markets or approach banks for further money requirements,” CFO Venkatraman Venkateswaran, Federal Bank said.

Bharat Madan, Global CFO at Escorts Kubota, has apprehensions over the investments and demand in agriculture and construction machinery sector. He believes it may get impacted if interest rates go beyond 6.5 per cent.

Investments due to festive demand

Due to festive demand, the investments are holding up enough however, surety of holding the momentum would require a couple of more quarters. The wait-and-watch approach will continue, said financial leaders.

“Major impact of the rate hikes is not foreseen as of now.Demand for the coming two quarters looks extremely strong. However global scenarios will keep on changing and what implications leave on India needs to be seen,” said Raymond CFO Amit Agarwal, emphasizing that the consumption is festive season driven now.

An improvement in seasonally adjusted capacity utilization of the manufacturing sector is seen from 73 per cent in Q4 FY22 to 74.3 per cent in Q1FY23. It is the highest level in three years according to a survey by RBI.

“There is a sustained revival in urban demand which should get a further impetus from the unfettered celebration of upcoming festivals after two and half years of living with COVID-19. Rural demand is also gaining gradually. Investment demand is picking up and is evident from the robust growth of domestic production and import of capital goods in July and August,” said RBI Governor Shaktikanta Das during his address during the latest monetary policy meeting.

Rates and Inflation:

RBI expects inflation to come down to 5.0 per cent in Q1FY24 after it retained its FY23 retail inflation outlook at 6.7 per cent.

Allowing high inflation to hover will invariably trigger second-order effects and unsettle expectations, Governor said. The Reserve Bank will remain alert and agile in the future, he concluded.

A major tool for the apex bank for its monetary policy decisions, Retail inflation, stood at 7 per cent going above its 6 per cent upper band target in August. For eight straight months Inflation has breached the RBI’s target.

Interest rates have been increasing worldwide including in India. The US Federal Reserve raised rates by 75 basis points at its 20-21 September meeting. It took the federal funds rate to a target range of 3-3.25 per cent. The Fed is planning to increase the rates to 4.25-4.5 per cent by the end of this year. Expectedly, emerging markets’ central banks including India’s RBI will follow the same lines.

Coal

Seven Firms, Including JSW Steel, Submit Bids For Coal Blocks

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These coal mines were also offered in the first attempt launched on March 25 this year and had fetched single bids.

JSW Steel and Adhunik Power & Natural Resources are among seven companies that have submitted bids for four coal blocks put up for sale under “second attempt” of auction process for 11 mines for commercial mining.

These coal mines were also offered in the first attempt launched on March 25 this year and had fetched single bids.

“A total of 7 companies have submitted their bids in the auction process,” the coal ministry said in a statement.

The seven firms are Auro Coal Pvt Ltd, JSW Steel, MP Natural Resources Pvt Ltd, Adhunik Power & Natural Resources, Assam Mineral Development Corp Ltd, Virtuous Mining Ltd and Twenty-First Century Mining Pvt Ltd.

Total seven bids were received by the ministry for four coal blocks namely Beheraband North Extn, GondbaheraUjheni East, Lalgarh (North) and Tokisud Block II.

“A total of 7 bids have been received for 4 coal mines,” the ministry said.

The online bids were decrypted and opened electronically in the presence of the bidders, it said.

The auction process for 11 coal mines under second attempt of 12th tranche of auction under the Coal Mines (Special Provisions) Act, 2015 and second attempt of 2nd tranche of auction under the Mines and Minerals (Development and Regulation) Act, 1957 for sale of coal was launched by the coal ministry on September 27.

The last date of submission of technical bid was November 29.

“As part of the auction process, technical bids comprising online and offline bid documents were opened today…in the presence of the bidders,” the ministry said.

(PTI)