The juggernaut has started rolling, quips Jayant Acharya, joint managing director & CEO of JSW Steel, referring to India’s unprecedented steel consumption growth led by infrastructure push. In a conversation with Sambit Saha of The Telegraph, Acharya stressed that steel demand is likely to gallop annually by 10 million tonnes (mt) on average and that he believes the election outcome would not alter the government’s focus on infrastructure, green transition and manufacturing. An edited excerpt:

JSW Steel’s PAT jumped five-fold year-on-year (Y-o-Y) basis. What led to this?

Multiple factors were in play. There was strong production performance with 6.87mt
production, the highest ever, compared with 6.14mt in the third quarter of 2022-23. Capacity utilisation was high (94 per cent), improved iron ore availability. Sales were also higher at 6mt, up 7 per cent, including exports higher by 44 per cent due to base effect. We also benefited from lower coking coal prices

But sales tapered on a sequential basis?

Yes, it dipped quarter-on-quarter (q-o-q) primarily because international markets were weaker, resulting in exports dropping sequentially. Higher exports emanating from China also disrupted pricing in many parts of the world.

Retail sales were down q-o-q primarily due to higher imports into the country. Imports were higher by 16 per cent q-o-q to 2.6mt while our export fell 16 per cent q-o-q. So there was more steel available in the country which impacted us. But our OEM sales improved, we had highest automotive, renewable in the third quarter and even the packaging sales grew very well. So we did well in the institutional and OEM segment, which is the core area.

How do you expect Q4 to play out?

There is an improvement in global steel prices due to elevated raw material prices, which resulted in higher export orders. Moreover, domestic prices are at near parity with imports. So I see imports being limited this quarter.

The fourth quarter is usually seasonally strong. So there will be liquidation of inventory that was added in Q3. I expect Q4 to be certainly better than Q3 and we are confident to meet full-year production and sales guidance.

The general election and the budget are around the corner. Will there be an impact?

Directionally, I don’t see any change post election in terms of the government’s focus, irrespective of the outcome. The juggernaut has started rolling. We expect infrastructure spending to be higher, energy transition to gather momentum and more manufacturing activities in the pipeline. All these activities will require steel.

In the budget, we look forward to some steps to contain unfair trade (import), to ensure the Make in India story does not get impacted. The steel industry spends a lot of capex and the investment should be protected. There was a net import of 1.2mt in the last quarter

Cutting back to JSW, how do you foresee 2024-25, given the ongoing expansion?

We will have higher sales and production in 2024-25 on the back of ongoing expansions in Bhushan Power & Steel and Vijaynagar. The capacity will be 38.5mt by the end of 2024-25, including 37mt from India.

In the next phase of expansion to 50mt by 2029-30, JSW has disclosed setting up a green steel capacity of 4mt. Can you elaborate?

We are looking at lower-emission steel to service those customers who are looking for it in various parts of the world. It will be done in two phases of 2mt each. The first phase will come by the end of the decade. It will come up on the west coast (Maharashtra).

It will be a DRI, scrap-based electric arc furnace (EAF) facility, which will run on renewable energy.

In the second step, we will look at using natural gas to replace coal injection in the furnace, reducing carbon footprint.

In the third phase, we will use green hydrogen when it becomes commercially viable. At present, we are studying the space, and watching how technology evolves.

This is over and above the 50mt target by 2030?

Yes, it is irrespective of that. Each of the locations can add another 5mt each, creating an additional capacity of 15mt. This will anyway take us over 50mt.

With JSW, Tata (Kalinganagar second phase) and AMNS (Hazira) expansion coming on stream in the next 12-18 months, do you foresee an overcapacity situation in India?

I don’t think so. Ramp-up takes place gradually. These capacities are coming at different periods of time. If you look at flat steel, the demand will be around 61mt in India. If we leave out stainless steel, the demand for flat steel depending on hot rolled coil would be 55mt. If steel demand goes up by 10-15 per cent, India will consume an additional 6mt of flat steel. So, I think in two years, when these additional 15mt flat steel capacities come up, demand is also going to catch up. There may be some marginal quantity that needs to be exported. The way I see it is that we need to put up capacities to meet steel demand which is likely to grow by 10mt on average.

So there is a clear investment case for JSW to reach 50mt?

Absolutely.

Net debt of JSW Steel went up by Rs 10,026 crore. Where do you see it settling by 2023-24?

Working capital went up in terms of raw materials and finished goods. We also put in Rs 1,400 crore of extra capex in Q3. But we should have better volumes on the back of exports and domestic sales, liquidating inventories and freeing up some of the working capital. What we should keep in mind is that we are funding a very large expansion and even then net debt to EBIDTA and net debt to equity are very healthy and we will see those are maintained.