JSW Steel: Gloomy outlook ahead

JSW Steel: Gloomy outlook ahead

by Shreya Anaokar Last Updated: Jun 03, 2022 - 02:11 pm 26.2k Views

Indian steel producers are staring at a sharp correction in margins in H1FY23E led by a combination of: weak regional prices as Covid led lockdowns in China impacted demand more than supply, stubbornly high coking coal prices,  lower steel realization led by weaker export prices, lower domestic prices on demand weakness and recent imposition of 15% export duty on steel. JSW Steel guided for a $125/ton increase in coking coal cost, the company expects a sharp correction in domestic steel prices in June 2022 and partial relief from lower iron ore costs.

JSW Steel’s expansion projects should drive 13% CAGR in volume over FY2022-25E. Other cost-saving and downstream projects remain on track for commissioning over FY2023-24E. Civil work has started at its recently announced 5 mtpa expansion at Vijaynagar, which along with other debottlenecking operations would increase JSW Steel’s capacity to 30.5 mtpa by FY2025E. The capital cost at $400/ton is attractive as it is a brownfield expansion and implies high IRR.

The company has given a consolidated sales volume guidance of 24 million tons and a production volume guidance of 25 million tons for FY2023E. Management sees the recent imposition of export duty on steel as a temporary measure by the government and expects the government to reverse it in the future. It shared that domestic steel prices are based on import parity prices and lower export prices will not have a direct impact on prices. Nonetheless, it expects prices to come under pressure with increase in domestic supply of steel, due to export duty.

Demand grew in 4QFY22. Management remains confident of a broad-based economic recovery in FY2023E on higher private and public infrastructure spends. Management expects steel demand to grow by 7.5% YoY in FY2023E led by higher steel demand from announced government infrastructure projects.

Management expects iron ore costs to reduce in 1HFY23E with the imposition of export duties, supply ramp up and declining global iron ore prices. Coking coal consumption prices stood at US$308/ton in 4QFY22 and it expects costs to increase by a minimum of $125/ton in 1QFY23E factoring the recent surge in prices to US$500/ton. However, this increase in costs shall be partially offset by declining iron ore prices and operating leverage from higher volumes.

Management expects average prices in 1QFY23E to be higher than 4QFY22 average prices. Price hikes taken in April had been somewhat offset with cuts in May 2022. Management expects prices to further reduce in June 2022 with the recent imposition of export duties and declining global steel prices. There has also been an upward renegotiation of auto contracts for 1HFY23E by Rs10,000-12,000/ton which should support NSRs .

Exports declined QoQ to 1.1 million tons in 4QFY22 (21% of the overall volumes), on lower prices in export markets. For FY2022, exports formed 28% of the overall sales. Management expects export to remain in a range of 15-20% of the overall sales in FY2022E.


How do you rate this blog?


Start Investing in 5 mins*

Rs. 20 Flat Per Order | 0% Brokerage

About the Author

Shreya Anaokar is a Content Writer at 5paisa. She has completed her Master’s in Finance and Graduation in Statistics from the University of Mumbai. 


Investment/Trading is subject to market risk, past performance doesn’t guarantee future performance. The risk of trading/investment loss in securities markets can be substantial. Also, the above report is compiled from data available on public platforms.

Open Free Demat Account

Resend OTP
Please Enter OTP
Account belongs to

By proceeding, you agree to the T&C.

Latest Blogs
Nifty Outlook for 6 June 2023

After a gap-up opening, the nifty index traded higher throughout the day and settled at 18593.85 levels with a 60 points gain. While, Banknifty inched up by 0.37%, and closed at 44101.65. On the sector front, Nifty Auto & Media has contributed more than 1% gains, followed by the Metal and Commodities indices. While PSUBANK, FMCG & IT dragged slightly for the day.

  • Jun 05, 2023
How to Protect Demat Accounts from Fraud

Introduction In today's digital age, knowing how to protect a demat account from fraud is crucial. An electronic repository for retaining your securities, a demat account is susceptible to many forms of fraud and online threats. However, you can protect your demat account and lessen the risk of fraudulent actions by taking crucial precautions.

  • Jun 04, 2023
How To Make ₹50 Lakh in 5 Years

Introduction A person starts investing with a sizable financial objective, but whether they can create that much money is always questionable. The goal is to become wealthy - a billionaire numerous times over. Making 50 lakhs in 5 years may seem to be an impossible feat, but it is not. Anyone may accomplish important financial objectives with appropriate preparation and dedication.

  • Jun 04, 2023

Start Investing Now!

Open Free Demat Account in 5 mins

Enter Valid Mobile Number