ArcelorMittal Can’t Do A Jio In Indian Steel Industry, Says JSW Steel

The Indian steel industry won’t have its “Jio” moment, despite the entry of the world’s biggest steelmaker, according to Seshagiri Rao.

The entry of ArcelorMittal won’t effect a change in the steel industry, which is unconsolidated and captive in nature, said the joint managing director and group chief financial officer of JSW Steel Ltd., while referring to the disruption by the Mukesh Ambani-led firm in India’s mobile telephony. “With huge incremental domestic demand of 63-64 million tonnes, one or two players can’t dictate and disrupt the industry trend.”

Jayant Acharya, director in charge of commercial and marketing operations, in fact expects ArcelorMittal’s entry to help. “Any competition will be healthy for the company given the economy has enough room for growth,” he told BloombergQuint in an interaction.

ArcelorMittal emerged in October as the preferred bidder for Essar Steel Ltd., India’s third-largest steelmaker, bringing billionaire Lakshmi Mittal a step closer to taking control of the insolvent firm. This was preceded by intense competition between companies wanting to take over the insolvent steelmaker, with disputes leading to India’s tribunals and the Supreme Court.

JSW Steel has considerable capacity in the western region and is mainly into flat products. “The only thing that differentiates us from the rest of the competition is the ability to produce high-quality steel products at lowest prices,” said Rao.

JSW Steel’s has the lowest cost per tonne amid peers despite an increase in the last one year compared to Tata Steel Ltd. , Jindal Steel and Power Ltd. and the Steel Authority of India Ltd.

JSW Steel also has the lowest per tonne cost for capital expenditure in the industry, according to ICRA Ltd.

The Sajjan Jindal-led company has an existing capacity of 18 million tonnes per annum, of which 5 MTPA is in western India. This, in addition to its upcoming 5MTPA plant in Maharashtra, pitting it against Essar Steel in the region. Flat steel products comprise over 70 percent of its product portfolio.

The company plans to differentiate its product line as it transitions from a volume- to value-based player to maintain 14-15 percent of market share. Value-added products, the steelmaker said, comprise nearly half of its portfolio—a proportion the company intends to maintain as it gradually ramps up capacity from 18 MTPA to 25 MTPA and then 45 MTPA by 2030.

Here’s how the company plans to use its total capex of Rs 45,000 crore for capacity expansion:

• Rs 22,000 crore will be spent on ramping up capacity to 25 MTPA.
• Rs 5,000-6,000 crore towards expansion of downstream facilities.
• Rs 13,000-14,0000 crore towards acquisition of iron ore mines.

On Bhushan Power & Steel Acquisition

JSW Steel said that it won’t rule out bringing in a partner—which was seen during the acquisition of Monnet Ispat—if it emerges as H1 (or lead) bidder for Bhushan Power and Steel Ltd. when lenders evaluate bids on Dec. 3.

The company said it will evaluate the option of rights issue once it has clarity over its position on Bhushan Power & Steel. JSW Steel’s board has okayed a proposal for raising up to Rs 5,000 crore via rights issue which will be valid for the next 12 months.

Other Highlights:

• To expand downstream facilities by 60 percent, crude steel by 40 percent by FY20.
• To maintain the share of value-added products once it scales up capacity to 45 MPTA by FY2030.
• Ineligible to take any legal recourse for Essar Steel on account of non-submission of expression of interest.
• Two of the company’s six captive mines are operational. Two more will be operational in the next two months and the remainder in the quarter through March 2019.
• NMDC is negotiating with the government on premiums to be paid for Donimalai mines in Ballari district, Karnataka.

(Corrects version which attributed quote in third paragraph to Rao)