The world is raising barriers and there should be a level-playing field for Indian steelmakers battling surging low-cost Chinese imports, JSW Steel joint managing director and CEO Jayant Acharya tells Sambit Saha of The Telegraph. Acharya also talks about his budget wish list, trade measures, JSW’s capex programme and the need to be within the guardrail of fiscal prudence. An edited excerpt...
JSW Steel said the economy is slowing down but added that government spending is expected to go up in Q4. Are you seeing that on the ground?
Up to November, the government capex spend was less than 50 per cent, about ₹5.1 5 lakh crore. It has to spend a lot to reach the target which I’m not expecting it will be able to, but the spend will be much more now. I see a little bit of reflection of that. The order position started inching up. Long steel sales are strong. This push on capex will further add to the tailwind. I am cautiously optimistic.
How important is government capex in spurring demand?
Close to 50 per cent, direct and indirect, through government and public sector. If you were to take the states, it accounts for a very big chunk. Ultimately infrastructure and construction accounts for 65 per cent of steel demand. Also, it has a huge multiplier impact, creating employment and economic activity that has a rub-off on consumption.
Within days, the finance minister will rise to present the budget. What’s on your wish list?
We expect the budget to be growth-oriented. On a fiscal balance, the government has done very well. With a lesser spend, the ability to push growth will be strong. Urban consumption has slowed. Inflation is eating into the disposable income of families. They need to push certain levers to improve consumption, which will also encourage private capex as the capacity utilisation will improve.
And from the steel sector?
It is important to see the gaps in mining regulations are addressed. With respect to royalty, we see gaps with the Supreme Court direction on the Orised Act, 2004. (The impact) is spilling over to various states that are trying to look at taxing mineral rights and land. It should not become irrational, and I’m sure state governments are cognizant of that. But there has to be some kind of amendment that ensures that it doesn’t overreach and damage the growth of these sectors.
Karnataka is proposing a mining tax. How does it impact JSW given it has a large operation there?
The law is not yet enacted. As of now, the tax is not on auctioned mines, so it is not applicable to us. Only a land tax is applicable to us at the rate of ₹100 per tonne. The bill does not provide for any levy with retrospective effect. Therefore, there will not be any liability on JSW on retrospective effect.
Are we looking at a little better Q4 than the Q3?
For JSW, yes. It is a seasonally strong quarter. Volume ramp-up will happen in JVML (Vijayanagar 5 mt expansion) and BPSL (1.5 mt expansion) will stabilise. There would be positive coking coal costs on the back of a $34 drop in Q3. We see further $10-15 (drop) through better blend management and prices.
Iron ore costs would go down because there is a reduction in January. More cuts are expected. Energy costs will also come down with some of our renewable energy projects. Our iron ore mines will start now.
So JSW is tackling the cost side, because the price will depend on China?
Correct. You got it right. See, the imports have reduced. The anticipation of trade measures is also reducing booking.
The prices are more likely to hold at this level?
Yes, because the prices of flats have gone down below longs. Usually, it’s the other way around. So, I expect some connection on the prices in February and March, on better demand and better support from lower imports.
Will JSW meet the guidance on capex in FY25, which has already been cut previously?
We have done about ₹11,000 crore in nine months. And the remaining part which is required for all critical projects to complete JVML and BPSL will be done. We would target to be in the range of ₹16,000 crore.
If prices don’t go up and steel companies carry on capex, the credit metrics will worsen, a rating agency recently said. Which path will JSW Steel take?
We will be absolutely cognizant of the (debt to EBIDTA) ratio. We are fully tracking that any kind of capex which we are doing will not be at the cost of the ratios. Going forward, we will see a better volume play which will give (higher) absolute EBIDTA. So, the ratios will certainly be better as we close March. But if there is margin contraction again, there could be a little deferment, except the critical projects.
So JSW will continue with the expansion up to 42 mt?
A big positive for us is that the cost of brownfield capex we are executing now is very low. It’s below $500 a tonne. That gives us a very low hanging fruit to expand.
What are you hearing about the safeguard duty that the industry has been asking for?
DGTR had given a window up to January 22 for stakeholders to respond. They will evaluate the responses and then take responses from steelmakers.
Thereafter, they will make their recommendation. In February, we expect feedback. The world is raising barriers. I think it is very important to provide a level playing field.