Why JSW Steel May Have An Edge As Peers Stare At Muted Volume Growth
Galvanized steel rolls. (Photographer: Andrey Rudakov/Bloomberg)

Why JSW Steel May Have An Edge As Peers Stare At Muted Volume Growth

India’s largest steelmaker is better placed than peers to meet rising demand as the nation has entered the seasonally strong quarter.

Steel mills ramped up production as the economic recovery after the Covid-19 lockdown drove demand for the alloy used to make everything from bridges and buildings to cars. But growth in output is likely to be muted in the next few quarters. That’s because companies have nearly exhausted capacity.

Most Indian steelmakers have been operating at 97-98% utilisation levels and have hardly any incremental capacities coming on stream, except for JSW Steel Ltd., said Rakesh Arora, managing partner at Go India Advisors, told BloombergQuint.

JSW Steel is on an expansion spree and commenced production of hot rolled plates from the new mill in Dolvi, Maharashtra with a capacity of 5 million tonnes per year on March 31.

That comes before the seasonally strong first quarter of fiscal 2022 when construction picks up before the monsoon sets in. Steel consumption in the first half is expected to be strong from both export markets and within India as the GDP is estimated to grow 10-12% in FY22.

Demand somewhat tapered in February before resuming to normalcy in March, said Amit Dixit, assistant vice president-research at Edelweiss Securities. But the numbers were more or less in line with estimates as most of the companies continue to export, he said.

Export realisations, according Dixit, have been 8-9% higher than domestic amid higher demand from Southeast Asian countries.

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

How Steelmakers Fared In Q4

In the quarter ended March, Jindal Steel and Power Ltd. outperformed, while Tata Steel Ltd.’s volumes were relatively subdued.

Production rose sequentially for all steelmakers during the quarter, led by JSPL and Steel Authority of India Ltd.

JSPL also saw its output rise the most among peers over a year earlier, followed by SAIL and JSW Steel. For Tata Steel, the numbers were flat.

Constrained production capacity mainly due to maintenance work in the second half of the last fiscal led to subdued performance from Tata Steel in FY21, Steel Mint said in a report.

Tata Steel’s January-March production is still better than 8% sequential decline in the preceding quarter due to lower opening inventory.

Also read: JSW Steel Remains The Best Volume Play In The Sector: Motilal Oswal 

Q4 Steel Deliveries

Most steelmakers saw deliveries grow in double digits over a year earlier on a low base as the Covid-19 lockdown had interrupted supplies in March 2020.

JSPL reported best sequential growth in deliveries because of higher production at its Angul unit, which was under maintenance in the preceding quarter ended December

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