JSW Steel may have reported a drop in profit in the fourth quarter of the fiscal but the company’s joint MD and CEO Jayant Acharya is confident the company would do better in 2024-25, led by higher volume coming from expanded capacity and better margin due to lower coking coal cost. Speaking to Sambit Saha of The Telegraph, Acharya elaborates JSW’s strategy to acquire a coal mine in Mozambique and focus on value added and special products. An edited excerpt:

Where do you see India’s steel consumption in 2024-25 given that election induced infra growth is behind us?

Consumption in 2024-25 last quarter was impacted by low priced steel that came to India, especially from China. That impacted sentiment and de-stocking happened pre election. We expect government capex to again pick up post election. Private capex is expected to come back with industries reaching high capacity utilisation. Housing sector has picked up after a long. Demand is coming from all sectors.

Despite lower growth, we had 16 million tonnes (mt) additional demand last year. Even if we take a lower growth for 2024-25, the consumption is expected to grow by 9 per cent, translating to 12mt incremental steel demand. But I don’t see that much supply coming to market this year.

JSW reported lower net sales realisation (NSR) and margin. How do you read the first half?

We lost margin due to higher coking coal cost. On top of that steel prices were subdued despite Q4 is usually a strong quarter, due to low priced imports. Moreover, there was de-stocking going into the election. So the margin was impacted by higher cost and lower NSR.

However, there were export opportunities and we liquidated 300,000 tonnes of inventory in Q4. We also achieved 6.73mt sales, the highest in a quarter. Going into the first quarter of this fiscal, we have seen improvement in cost, by $22-27 a tonne due to lower coking coal prices. And if the present price holds ($235 f.o.b Australia), that augurs well for Q2 as well.

Steel prices have also improved, in China prices went up by $20 a tonne and we could see the impact here. So all put together, we should be able to deliver better EBIDTA and margins.

Moreover, additional capacities will be available to us from expansions. In 2024-25, we will do better both by absolute numbers and JSW will return to normative EBIDTA/tonne (Rs 12,500 / tonne), with cost under control and better efficiency.

Have you been modest in setting the production and sales target this year despite new capacities being added?

You may be right. Why we have kept this: the hot strip mill (HSM) of the 5mt expansion at Vijaynagar has started. The integrated facilities such as blast furnace and SMS will be operational in the next two months and then the ramp up will start. There is a bit of delay due to labour shortage due to the summer and also some of them went back for elections.

The expansion at Bhushan Power & Steel Ltd is complete and the ramp up will start there too. BPSL will reach full capacity (1.5mt expansion) by October and Vijaynagar by the end of Q3. That’s why we have kept it lower but can do better in case we can stabilise faster.

So JSW will have the fully expanded capacity in 2025-26?

The capacity which will be available to us in 2025-26 is going to be 36.5mt in India and 1.5mt in the US.

When do you plan to start the 5mt expansion at Dolvi and when is the completion target?

The engineering work started. At ₹19,200 crore with a captive power plant, it will be one of the lowest capex brownfield expansions of the world. Moreover, the product mix will be value added (wide strip mill), therefore margin accretive. It will be complete by September 2027.

What is your plan to add long products portfolio to your repertoire?

Looking at the option in one of our eastern works. We are studying that for now.

The value added steel portfolio is 61 per cent. Where do you see this heading up when you reach 42mt (2027-28) and then 50mt (2030-31)?

Our target has been to have at least 50 per cent of the HSM as value added. We already have that. With expansion, JSW will continue to scale up downstream with value added products and special products. This is decommoditising our pathway and a very key focus area for the company.

Export picked up for JSW in Q4. Will the trend continue?

If you recall I had said before that export opportunity had opened up in December itself. There will be an incremental demand of 30mt globally which is a positive. But there are challenges in shipping (geopolitical tensions) which discourages customers. I believe exports will remain range bound between 12 and 15 per cent. (JSW’s 2024-24 export was 14 per cent, 20 per cent in fourth quarter).

JSW announced acquisition of a coking coal mine in Mozambique. But mining operations of Indian companies have not done well over the years. What gives you confidence that it would be different this time around?

This particular mine is a pre-development mine with prime hard coking coal, which is rare. People are not developing coking coal much. This grade is most volatile in terms of price. The reserve is 800mt and close to geographical proximity to India.

The mine has come at a good value, 100 per cent at $80 million. Once we close the transaction this year, the development plan will be put in place. But there is already mining going on in the area. ICVL and Vulcan are mining there, so we don’t see a
challenge.

Evacuation from the pithead to the port used to be a challenge in Mozambique. Is it now sorted?

We have seen the terrain. Some infrastructure may have to be developed. But it’s possible. We can use the Beira port in the first phase and expand the capacity in the second phase. There is a railway connecting to Beira port. We will have the option to truck it to rail and load to wagon or build a conveyor belt system.

Does Mozambique fulfil JSW’s quest for mines abroad?

We are looking out for a few more but it will be strategic. Our annual requirement will be 70mt when we reach 50mt capacity by FY31. We will meet that from some blend from Mozambique and 2mt from the mines in India. Because of the decarbonisation journey, approvals for new coal mines in Australia, Canada and the US are difficult and hence this acquisition makes sense.