JSW Steel sets potentially huge capital expenditure 20,000 crore for the current financial year FY23. The company expects adverse conditions like export duty on steel and higher coking coal prices to be short-lived.
JSW Steel Joint Managing Director and Group CFO Seshagiri Rao told PTI in a telephonic interview, “The major headwinds are volatile coke prices and export duties on steel. However, we expect these to be short-lived. There will be some moderation in exports but value-addition. Steel exports will have less impact.So far, we remain optimistic and the CAPEX plan Rs 20,000 crore is retained in the current financial year.”
Notably, JSW Steel had set a CAPEX of 15,000 crore in FY22 as part of its strategy to increase capacity. Also, last year, the company paid more than 19,000 crore to terminate the acquisition of Bhushan Power & Steel.
Rao said that amidst the higher CAPEX schemes, the debt level of the company will not increase significantly from the existing outstanding. 56,700 crores on account of “payment from internal sources”.
Earlier this month, the government imposed export duties on 11 iron and steel intermediates and cut import duties on three major raw materials for steel production and three inputs to make plastic goods. The move to reduce import duty on certain raw materials, including coking coal and ferronic, is to reduce costs and bring down prices for the domestic industry.
Also, the Center increased the duty on iron ore exports to 50%, while the duty on some steel middlemen was increased to 15%. This has been done to increase domestic availability.
According to Rao, if such orders continue for a longer period, there will be underutilization of 150 million tonnes of capacity in the industry as it was created not only for domestic demand and import substitution but also for exports.
He said, “At least 11-12 per cent capacity of the industry is created by targeting export markets. And in the current financial year, we have the potential to double that. So, if export duty continues for a longer period , then it may result on aggressive expansion plans of steel makers,”
In the financial year FY22, steel exports stood at 18.37 million tonnes.
JSW Steel aims to increase its capacity to 37.5 million tonnes by FY25 and 45 million tonnes by 2030. Presently, the company’s capacity is around 21.47 million tonnes.
In FY22, on a consolidated basis, JSW Steel produced the highest quarterly crude steel production of 5.81 million tonnes, up 11% QoQ and 38% YoY. While sales of salable steel stood at the highest at 5.99 million tonnes, a growth of 29% QoQ and 47% YoY.
For FY23, JSW Steel expects total combined crude steel volumes to be 25 million tonnes, while sales are estimated at 24 million tonnes.