JSW’s steel production to take a hit in Q1, Seshagiri Rao says
JSW Steel’s steel production will be hit hard in the first quarter of the current fiscal year due to the impact of the ban on the use of oxygen for industrial purposes. Steel consumption is also expected to be lower, as localized lockdowns in several regions of the country impact demand.
However, company management hopes that the impact will be limited to a quarter and that conditions should improve from the second quarter.
Seshagiri Rao MVS, deputy general manager of JSW Steel and group chief financial officer, told FE that the company’s capacity utilization of 96% in the March quarter fell to 91% in April.
“With the demand for medical oxygen remaining at the same level, (capacity utilization) in May could also be on similar lines. So yes there will be some impact on steel production, which was 4-5% lower in April and May would be on similar lines, ”he said.
The company currently supplies up to 1,200 tonnes per day of medical oxygen and supplied a total of 20,000 tonnes in April. At the end of last month, JSW Steel said it would cut steel production and increase the supply of liquid oxygen, which led to a surge in demand when the second wave of Covid-19 hit India. JSW Steel supplies liquid oxygen from its three manufacturing plants in Karnataka, Maharashtra and Tamil Nadu to various states.
There has also been an impact on the demand for steel, as localized lockdowns and the diversion of oxygen for medical purposes hit steel-consuming industries like metal fabrication and welding units. “In April, steel consumption fell to 6.7 million tonnes from 9.1 million tonnes in March, so there is an impact of about 3 million tonnes of steel consumption,” said Rao.
However, as the number of Covid-19 cases declines and vaccination is rolled out for the majority of the population, Rao said he hopes things will return to normal. “The next quarter should be fine, this quarter we are filling the domestic market deficits by increasing exports,” he said.
Rao pointed out that despite the short-term hiccups, the year 2021 will remain strong for steel consumption. The World Steel Association (WSA) estimated this year 102 million tonnes of additional demand, or 5.6% more. Of this total, 32 million tonnes will come from China with 3% growth, and the rest 70 million tonnes will come from the rest of the world, where growth is close to 9%.
“WSA believes that the large infrastructure investments pushed by various governments in different countries, which are raw material and steel intensive, will lead to good demand for steel. In India, WSA said that the demand for steel will be 106 million tonnes from the current level of 94 million tonnes, so there will be 12 million tonnes of additional demand in India in 2021, ”he said. he declares.
Regarding steel prices, which have seen a sharp rise, Rao said that while short-term volatility was created by speculative forces and would see some corrections, it was unlikely to be strong. “Basically the demand is very high, either globally or in India, despite some impact from the second wave of Covid,” Rao said. Hot-rolled coil prices have been rising since August 2020. Since then, the metal has risen 238% to $ 1,515 per tonne, according to Bloomberg data.
JSW Steel reported a sharp increase in consolidated net profit nearly 22 times on an annual basis to Rs 4,191 crore for the quarter ended March 31, 2021, recording its highest quarterly profit on record. This multiple jump is due to an increase in demand for steel, a sharp rise in steel prices around the world and a lower base from last year, which was affected by the disruptions caused by the pandemic of Covid-19. The steel producer also reported its highest quarterly revenue on record, which rose 51% year-on-year to Rs.26,934 crore.