India's Top Steelmakers Plan Record Output on Strong Demand

(Bloomberg) -- India’s biggest steelmakers are set to expand production to a record after reporting solid quarterly earnings amid strong steel prices.

JSW Steel Ltd. posted record net income Wednesday and outlined a $6 billion plan to raise output. Tata Steel Ltd., which aims to double domestic capacity, swung to profit, helped by a one-time gain.

Both mills are ramping up to meet an anticipated surge in domestic consumption with the government set to spend trillions of dollars on expanding infrastructure. Paving the way are the best market conditions in years as prices are bolstered by lower exports from China, the world’s biggest producer.

Mills around the world are also benefiting. ArcelorMittal, the biggest, posted its best quarterly profit in six years last week, and Thyssenkrupp AG said earnings at its metal-making division more than doubled.

JSW sees Indian steel consumption rising by as much as 7.5 percent in the 2019 financial year, supported by a government push for infrastructure projects and strengthening consumer demand, said joint-Managing Director Seshagiri Rao.

“The medium term demand growth outlook is quite constructive,” he said.

JSW aims to boost steelmaking capacity by 37 percent to 24.7 million metric tons a year by March 2020, the company said in its earnings statement. Tata Steel is aiming to double capacity in India to 26 million tons in five years.

Both producers will expand their own facilities, while seeking to snap up some of the distressed assets for sale under India’s new bankruptcy laws.

Brokerage Edelweiss Securities Ltd. is upbeat on JSW’s drive for growth led by capacity additions, investments in its U.S. plate and pipe mill and potential acquisitions. “The company has the balance sheet headroom to pursue such growth opportunities,” analyst Amit Dixit said in a report received Thursday.

Tata Steel’s performance will improve after the purchase of distressed mill Bhushan Steel Ltd., which will help the mill increase volumes, Dixit said. In addition, he said a potential joint venture with Thyssenkrupp for their European operations will allow the company to reduce debt.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net.

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Keith Gosman, James Poole

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