Commodity prices may be range bound in ’23: JSW CFO

“The results should be viewed in terms of Q3 versus Q2, rather than year-on-year, as the previous fiscal year was unusual,” he said in an interview. The price hike took some time to catch up, resulting in exceptionally strong margins posted by steel companies. However, in the current year, steel prices recovered after May and margins also normalised.

“We have recorded inventory loss in Q1 and Q2 of this financial year, and added to this, the rupee has depreciated from 75 to 82 to a dollar. Hence, a quarter-to-quarter comparison would be appropriate,” he said.

after reporting the loss of The company earned a net profit of Rs 915 crore in the September quarter. 474 cr in Q3 as compared to Rs. 4,516 crore a year ago. “It’s a big change with almost swing 1,400 crore,” Rao said.

The sequential growth was helped by highest ever production for JSW Steel apart from a significant 33% business share in the automotive segment on the back of record domestic vehicle sales. Steel dispatches to manufacturers of tinplate, tools, and wind and solar power also increased.

Still, despite good domestic volumes, JSW Steel’s inventory rose to 180,000 tonnes in the third quarter, mainly due to a sharp decline in exports, which fell 32% and accounted for 7% of production. As a result, total sales volume was down 2% sequentially.

Rao said JSW Steel’s financial health has been made possible by cost reduction on a sequential basis 7,900 per tonne, thereby improving earnings before interest, tax, depreciation and amortization (EBITDA) per tonne. from 3,460 in Q2 8,150 in Q3. The performance of its units has also improved as compared to Q2 from 10 crores 517 crore, resulting in an increase in consolidated EBITDA. 4,547 crore, he added.

Rao expects steel demand to remain strong in the fourth quarter, as it usually does in the last quarter of a financial year. The auto sector has generally seen an increase in sales in the fourth quarter as compared to the third quarter and state governments also have higher budgets. In addition, higher capital expenditure related to agriculture and increase in activity for residential real estate will lead to higher demand for construction equipment as well as compressors, textile machinery, paper machinery and wagon and locomotive manufacturing, which will drive steel demand, he said. .

Steel demand stood at 30 million tonnes in Q3, which Rao expects to grow by two million tonnes in Q4, taking the total demand for FY23 up by 11% to 118 million tonnes.

Exports may also improve due to withdrawal of duty in November and easing of Covid policy in China, resulting in replenishment of material globally.

“The prices have become attractive for exports and removal of export duty will help us compete in the international markets,” Rao said.

However, Rao said that commodity prices will remain range bound in 2023. Inflation is very high in Europe and the US, and the inflation target remains at 2%. The debt-to-GDP ratio is also very high in many countries, and hence we are not very optimistic about recovery in global demand,” Rao said.

The only sector for all triggers is the China opening. “Comments are coming that the Chinese government is focusing more on consumption-led growth than investment-led growth. Compared to November, prices have improved in China and Europe, also in the US; however, they are still higher than in March. -are below the April high,” Rao said.

Rao said with raw material prices rising from November lows, coal and iron ore prices will not be sustainable. Most of the steel companies have announced capex and expansion plans to meet the demand in the domestic market. JSW Steel is also adding 10 million tonnes of capacity. out of the capex allocation of 49,000 crores, 15,000 crore will be spent in FY23, and 34,000 crore in the next two years, Rao said.

Meanwhile, JSW Steel is scouting for iron ore mines and will participate in the auction. It is investing in iron ore beneficiation plants and slurry pipelines in Odisha to cut transportation costs to ports. Rao said JSW Steel’s units would do better in the March quarter. He added that carrying forward of coking coal inventories from Q3 to Q4 would ensure that the current spurt in coking coal prices remains unaffected.