JSW Steel plans Rs 20,000-crore capex in FY24 for capacity expansion: Rao

The expansion would take JSW Steel's capacity to around 38 mt

JSW Steel is pegging its capital expenditure (capex) for FY24 at Rs 20,000 crore as it plans to add 9 million tonnes (mt) to its current capacity. The capex is part of the Rs 49,000-crore spend that JSW had outlined over a three-year timeframe.

During the nine months of FY23, the company’s capex stood at Rs 10,707 crore against Rs 15,000 crore planned for FY23.

JSW had earlier envisaged a capex of Rs 20,000 crore for the current financial year.

But falling steel prices and slowing demand prompted JSW to calibrate it to Rs 15,000 crore after Q1.

Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel, said that the company would meet the Rs 15,000-crore capex target this year.

“If we spend Rs 15,000 crore this year, then the carry forward expenditure would be Rs 34,000 crore. Out of that, Rs 20,000 crore will be spent next year for creating 9 mt extra capacity,” Rao said. The balance — part project cost of expansion and downstream projects — would be for FY25.

The expansion next year would take JSW Steel’s capacity to around 38 mt. 

But Rao pointed out that a number of projects had been commissioned this year also. This would result in cost reduction and improve the product-mix. In addition, the capacity of Bhushan Power & Steel has been expanded from 2.75 mt to 3.5 mt.

Though steel demand has slowed down in major economies, the inflection point for JSW would be next year when it adds huge capacity. Rao, however, does not envisage any problem in selling additional volumes in the domestic market.

“This year, we see 12 mt of incremental demand. So, the overall steel consumption in the country would be 118 mt, which means around 11 per cent growth. We expect another 10 mt of incremental demand, if not more next year,” said Rao.

He said the new capacity would be from NMDC and whatever ramp-up that JSW would be doing. Rao expects capacities from other companies to come partially in 2024-25 and fully in 2025-26.

“As far as capacity versus incremental demand is concerned, I don’t think there is a problem in the domestic markets,” he said.

After a two-year rally, headwinds in the global markets led to a major correction in steel prices from Q1, and this continued till December. Market conditions reflected in the financial performance of steel companies. In Q3 of FY23, JSW Steel reported an 88.75 per cent year-on-year (YoY) drop in consolidated net profit.

But there are positive cues, especially from China, with the easing of zero-Covid policy. “Assuming that China opens up, there will be more economic activity, which will lead to consumption-led growth rather than investment-led growth. But the property sector problems in China are more structural in nature,” Rao said. “Considering that, I don’t see a scenario that Chinese demand or production will be more than that of 2022,” he added.

He also said that the debt-to-GDP ratio in many countries is very high. So, the fiscal space for any further stimulus is limited.

“In that context, I don’t expect robust steel demand. As far as prices are concerned, they will be range-bound.”