JSW Steel, which reported a drop in profit for a second straight quarter as input costs rose, expects the government to formulate a stimulus package to arrest the economic downturn. The country's third-biggest steel-maker plans to withdraw the cut in its long-product output next month, but will continue with the 20 per cent cut in flat steel as demand continues to remain weak. In an interview with Nevin John, JSW Steel Vice-Chairman and Managing Director Sajjan Jindal exuded confidence that the industry would return to full production in the next few months as there were signs of improvement in the credit situation. Excerpts:
Do you see any change in the present situation in the near future?
It will take another two months for a change. Industrialisation and urbanisation can not be halted for long. I hope the Union government would come out with necessary steps to improve the condition. I think the steel-makers can resume full production by January as we are expecting some correction.
Are you expecting any further fall in steel prices?
Domestic steel prices are linked to global prices. With the fall in global prices, steel prices in the country will also come down. So far, the prices have dropped 50 per cent. As a steel-maker, my major concern is demand rather than price.
RBI has taken several measures to boost liquidity. How far has it eased the credit crunch?
Liquidity is a serious concern for companies. Because of the non-availability of funds most of the companies have kept their capital expansion plans on the back-burner. The situation is improving. The global liquidity crisis has not yet affected the JSW group and we are going ahead with our expansion plans.
What is the outlook for the second half of this financial year?
The steel industry has witnessed a fair growth in the first six months. Unfortunately, the growth in the remaining six months will be flat. The downturn in the auto and housing sectors has affected the sales growth of the steel companies.
Are you planning any acquisitions now that several of the assets are available cheap?
The drop in the value of most of the assets can be attributed to the slump in the stock market. However, it is not the right time for acquisitions as the future is unpredictable. Non-availability of funds is also another reason for the companies to stay away from acquisitions.
Moreover, sellers are still valuing their assets higher, despite the slowdown.