JSW Steel Expects Higher Profits Despite Slowing Demand
Signage for JSW Steel Ltd. is seen on the exterior of the company’s manufacturing facility in Dolvi in Maharashtra. (Photographer: Dhiraj Singh/Bloomberg)

JSW Steel Expects Higher Profits Despite Slowing Demand

JSW Steel Ltd. will look to cut costs to boost profit and margin even as it expects steel demand to slow till 2020.

India’s largest steelmaker, citing Worldsteel in its 2019 annual report, has forecast domestic steel demand to fall to 7 percent in 2019 and 2020 compared with 7.5 percent in 2018 due to higher imports.

Global steel demand, too, is expected to drop to 3.3 percent in 2019 from 3.6 percent last year due to tapering of the U.S. policy stimulus, the company said.

The steelmaker said it has set aside a little over Rs 48,500 crore to expand its capacity from 18 million tonnes per annum to 24 MTPA between 2018 and 2022.

Ongoing trade disputes and the global economic slowdown which have been routing Asian steel inventory to India are negatively impacting the country’s steelmakers.
JSW Steel’s FY19 Annual Report

Cost Rationalisation, Higher Value-Added Products

JSW Steel expects cost cuts and production of higher value-added steel to improve its margin. The ongoing consolidation in the industry is also expected to drive margin expansion, it said.

Here is a list of cost-saving efforts the company said it would undertake:

  • Commissioning coke oven battery at Dolvi in Maharashtra to eliminate procurement of coke.
  • Increasing pulverised coal injection to reduce coke intake.
  • Using captive iron ore which will replace high cost imported iron ore.
  • Diversification of coal procurement basket and optimising coal cost by dynamic coal blend change.
  • Reduce logistics costs by port optimisation and usage of cape vessels to reduce freight costs.

Priorities In Place

JSW Steel said it would first operationalise mines acquired as part of the iron ore auction process to secure at least 20 percent of its raw material requirements for the ongoing year. It then intends to commission conveyor belts and complete expansion of 13 MTPA capacity.

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