JSW Steel Portfolio To Be Skewed In Favour Of Downstream, Specialty Products: Seshagiri Rao

The company, which recently completed the acquisition of Welspun Corp.’s platemill business and insolvent Bhushan Power and Steel Ltd., expects downstream and speciality steel to contribute more than 55% of its volumes compared with 50% now, said Rao in an interview with BloombergQuint. Realisation of speciality steel—with special qualities because of the addition of other metals—is more than $100 a tonne higher than the hot-rolled coil, he said.

India’s largest steelmaker foresees more consolidation in the sector in the next two to three year as it looks at ways to expand capacity from the present 27 million tonnes per year to 45 mtpa by 2030. It’s evaluating the option to bid in the divestment of Rashtriya Ispat Nigam Ltd., Neelachal Ispat Nigam Ltd., and Steel Authority of India’s plants.

JSW Steel, however, is not in a hurry to cut down its leverage guidance of 3.75 times even when peers are cutting debt by taking advantage of higher cash flow in the commodity bull run.

Plans For Bhushan Power & Steel

The enterprise value of $1,050 a tonne for the recently implemented resolution process of Bhushan Power & Steel is attractive, given the scalability of operations and the cost-cutting measures.

In a two-phased plan, JSW intends to bring down the cost by 10-15% and expand Bhushan’s capacity from 2.5 mtpa to 4 mtpa in phase 2 by FY23 with a capex of Rs 3,500 crore, Rao said.

Prices And Input Costs

Seshagiri said JSW Steel increased prices by more than 6-7% in April. He sees more room for steel prices to rise given the huge demand from China, an uptick in international prices and that domestic prices are still at a 15% discount to the imported steel on the landed basis.

JSW Steel, not a fully integrated steelmaker as it has to buy iron ore, doesn’t see the prices of the raw material rising as the production normalised in Brazil and Australia. Domestically, it expects Odisha miners to ramp up their iron ore production capacity sooner and added that resumption of Donimalai mine in Karnataka would open up more supply.

Watch the full interview here: