JSW Steel: Opportunity for India to become a major steel player in the international market : Jayant Acharya, JSW Steel
The value-added product also contributes approximately 55% of revenue, which has supported profitability. What are the prospects for the future? Is there more emphasis on increasing the share value-added products as well?
Absolutely. Our goal is therefore to ensure that the value-added and special products of our wallet are always above 50%. We continue to focus on that. We get the best of technology to ensure that we get products that are on the higher value spectrum and we replace imports of these products that come into India. This therefore helps us to diversify the product portfolio and increase our value-added mix in the overall system. So we will continue to be over 50%. Currently, we are over 55% but we will remain over 50% in the mix of value-added and special products.Can you just talk to us about the opportunity to gain market share given what’s going on in the world with issues in Europe that could lead to high steel production, issues in Russia and various other places . Do you think this is one of the best times to gain long-term market share for big Indian steel players like you?
It certainly is. I think India is a natural exporter of steel because we have large reserves of iron ore. We have good steel production capacity and state-of-the-art facilities. It is therefore logical that India is an important exporter and player in the international market. We see an opportunity there with the moderation of exports from China to some extent, as well as the moderation of exports from Ukraine and Russia to the developed world. So yes, we would see that as an opportunity and now that India’s exports have opened up after the removal of export duties, we see that as an advantage.
Given the do you see that as an advantage, JSW Steel, how do you plan to exploit this opportunity because you had an investment plan that was quite aggressive from 27 million tons to 37 million tons. Are you on the right track?
Yes, our capacity expansion is from 27 million to 37 million tonnes, which is on track. We are developing about 10 million tons over the next two years. And we would give more color with project details at our annual results meeting in May.
One more thing we talked about whether, how, how things look but how would you classify the Indian steel industry at this point for exports because if we just rewind on a basis pre-Covid, every business big, small was struggling with debt, balance sheet issues, what’s really going on, how things are going. So whether profits are that high or not, is the balance sheet of the Indian steel industry now there to focus, to grow or they can take some leverage so that if they gain market share, they can actually invest. Is this a big change in the last three years?
I would say that the Indian steel industry is in a much healthier position today than it was in recent years. And we see an opportunity to develop Indian steel capabilities in the future. Through 2030, the National Steel Vision has projected 300 million tons of steel capacity anyway, 250 million tons of production and about 230 million tons of demand. So we see an expansion in India to meet domestic demand, which will continue to happen. In addition to this, India will remain an exporter of steel for various products globally. And we see that as an opportunity and I particularly feel that over the next decade India will be able to gain market share from countries like China where they have taken, I would say, a thoughtful measure to reduce energy-consuming, energy-consuming exports production. So, over a period of time, we will see China’s steel production moderate and its exports also moderate, which would give the Indian steel industry an opportunity to gain market share.
If we talk about the longer term picture, in terms of steel prices, you could say that steel prices over the last three years have been very, very good. But when you look at the longer-term picture, over the last 10 to 15 years, price increases have been only slightly closer to inflation. Do you think this is something that will continue at 4-5% over the next 10 years? Again, will this follow inflation as far as prices go?
The steel industry has seen a lot of volatility, mainly after geopolitical tensions in February last year. Commodity prices peaked, as did steel prices. However, steel prices corrected sharply between April 22 and December 22, and even India saw a nearly 30% correction here. That said, steel prices have stabilized on a positive note over the past quarter. We expect higher commodity prices to support steel prices at a particular level going forward.
I wanted to get a bit more insight on the supply side because we understand from industry sources that the unavailability of the train rake is an issue, as well as the fact that the new issue of the private wagons etc. , was also limited. How big is a problem?
I think we are facing issues with the availability of railway cars, especially for transporting bulk raw materials. Currently, we transport approximately 110 million tonnes of bulk raw materials to all sites, 70% of which by rail. So we would double that volume over the next three years as our capacity increases. Already, we are constrained as to the availability of rakes, especially in the East sector, especially on iron ore. And we have made a commitment to the government to allow private participation in the purchase of wagons, so that we are able to supplement as a private sector the availability of steel wagons.
We continue to commit to this, and we would need government support to ensure that private sector participation here is allowed, until the rake situation improves in the country.
