India’s JSW Steel to focus on exports and cut costs
May 26 2020 11:57 PM
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JSW Steel
Smoke and steam rise from the JSW Steel manufacturing facility in Dolvi, Maharashtra. The Indian firm won’t pursue overseas acquisitions until it turns around its businesses in the US and Italy, although it will continue to look at domestic opportunities, according to JSW Steel’s joint managing director Seshagiri Rao.

Bloomberg/Mumbai

JSW Steel Ltd, India’s most valuable steelmaker by market capitalisation, will focus on exports, cut costs and delay expansions as the coronavirus pandemic slashes demand at home.
Once a bright spot for global demand, steel consumption in India plunged 91% last month while crude steel output tumbled 70% as a nationwide lockdown to combat the pandemic halted activity across industries.
Recovery in India’s demand will be gradual and may only gather pace in the second half of the year started April as the industry is facing shortages of labour, logistics and liquidity, according to JSW Steel’s joint managing director Seshagiri Rao.
With India’s steel consumption forecast to decline by 10% this financial year, the steel mill will focus on exports for at least the next six months, he said.
“For companies like us the strategy is, whatever demand will pick up in India, we will service that demand, and whatever balance is being left out, we will export,” he said in an interview.
A drop in local iron ore prices and imported coking coal rates, together with a weaker Indian currency will make exports more competitive, he said.
Owned by tycoon Sajjan Jindal, the steel mill plans to export more than the 3.1mn tonnes of value-added products it shipped out last year, to countries in Asia, the Middle East and Africa.
JSW Steel, which operated its plants at 38% capacity in April, has now ramped up capacity to 85% this month and aims to produce 16mn tonnes of crude steel this year.
The company, which last week posted an 85% plunge in its January-March quarterly profit, has identified key areas for reducing costs and deferred the doubling of capacity at its Maharashtra plant by half a year.
It has also put on hold a $150mn modernisation plan for its US plate and pipe mill.
The company has cut its capital expenditure by 45% to Rs90bn ($1.2bn) and has pushed back plans to expand capacity to 23mn tonnes in India to March 31 next year, from before September.
It’s seeking to lower freight costs for purchases of bulk raw materials and is targeting a 10% reduction in fixed costs.
Credit to the industry has slowed, showing risk aversion by bankers.
At the same time, other sources of raising money such as mutual funds, non-banking financial companies and foreign investors have dried up.
JSW availed a three-month moratorium on loan repayments as it wanted to maintain liquidity.
It will decide in the next few days if it wants to avail the moratorium again though it’s prepared to make the payments on June 1.
JSW won’t pursue overseas acquisitions until it turns around its businesses in the US and Italy, although it will continue to look at domestic opportunities.
The mill aims to potentially boost production from its own iron ore mines to 23mn to 24mn tonnes this year from its newly acquired Odisha blocks and Karnataka. The company’s total iron ore requirement will be 30mn to 32mn tonnes this year.



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