Prices in India haven't gone up to global level: Seshagiri Rao of JSW Steel

In a Q&A, the firm's Jt MD and CFO says he does not see the govt taking any action on steel import duties, based on 'wild allegations' made on price hikes

JSW Steel recorded one of its best performances in the December quarter on the back of a strong demand environment that led to a surge in prices, causing discontent among user industries. In an interview with Ishita Ayan Dutt, Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel, points out that the market has recovered after hitting the bottom in Q1, but the increase in global prices has been much higher. Edited excerpts:  

Is this the best quarterly results for JSW Steel?

In terms of EBITDA per tonne, this is the second best. But from a consolidated and standalone EBITDA point, in absolute terms, this is the best quarter.

Given the concerns raised by user industries on prices, do you expect some policy action in the budget?

We respect the concerns of user industries, but at the same time, it should be based on facts. There cannot be wild allegations that steel prices have gone up in India, which is not correct.

We have been analysing India and global data for the last six months. In April, the price was $394 a tonne; in December, in China, it rose to $710 a tonne. So, there was an 80 per cent increase in steel prices in China. US prices increased 119 per cent in the same period and Europe, 84 per cent; in India, the price was Rs 35,000 a tonne and went up to Rs 53,000 in December, an increase of 51 per cent.

If it is being said that steel prices are rising, it means that steel prices are increasing globally, but should not increase locally. It is possible to do it if there is no cost pressure at all. But the losses declared by steel companies in the June quarter were over Rs 6,000 crore.

The price of iron ore in June was $82 a tonne and rose to $159 in December, up 94 per cent globally. In India, the NMDC price in June was Rs 1,960, and rose to Rs 4,610 in December, a 135 per cent increase.

Prices in India have not gone up to the global level. So I do not expect the government to take any action with regard to steel duties on imports based on wild allegations that have been made. The duty is zero with FTA countries and 55-60 per cent imports is at zero per cent duty.

Chinese prices have softened the past few weeks and in India, secondary producers have pared prices. do you see prices moderating?

TMT prices have come down right now for secondary players, but it does not indicate there is a problem in the market from the demand point of view. I don’t see a problem for primary producers with regards to demand and supply.

What kind of capacity addition are you looking at for Q1?

As far as upstream is concerned, there is some delay in the Dolvi project because we are not able to get equipment suppliers and also supervision and technology suppliers who have to come from overseas. Those issues are hitting us in completing the project by march 31, 2021 and it may slip to the next quarter (April-June).

But we are in the final stages of commissioning; majority of the units will be commissioned by March 31, 2021 and the entire five million tonne will be available for part of the year. The one million tonne additional capacity in Vijayalnagar will come in phases starting from Q1. 

You have submitted an EOI for Uttam Galva. Are you going to bid?

We are expanding upstream; five million tonnes at Dolvi and one million tonne at Vijaynagar and have taken some steps to increase our downstream. Any downstream like Asian Colour (which we took over), we will continue to evaluate. Keeping that in view, we submitted an EOI for Uttam Galva and are still evaluating the option.

What is the status of your bid for Gontermann Peipers?

Gontermann is strategically important for us and the country because there is no other roll supplier in India and that is why we have shown interest. We are awaiting response from the committee of creditors (CoC).

You were looking at closing BPSL acquisition before the SC verdict, have you now decided to wait for it?

There are litigations involved and appeals are pending before the Supreme Court (SC). So, any other way of completing the transaction is very difficult.

What made it difficult?

The asset is encumbered; ED has attached the property. If I have to complete the transaction, I have to get an unencumbered asset released to me, which is not possible right now.

So, there should be a mechanism that is acceptable to all the parties- CoC and JSW Steel- for completing the transaction. When so many lenders are involved in the CoC, it is not easy to work out a mutually acceptable solution. The SC will finally have to decide.

JSW has set sustainability goals, how important is it for ESG (environmental, social and governance) investing?

JSW Steel has been rated at Leadership Level (A-) by CDP in 2020 when the average rating in Asia is D (Disclosure Level). This is a great recognition for JSW for keeping sustainability at its core.

ESG has a strong correlation with the long-term profitability and performance of the company. Generally, companies that rank high in ESG are also doing well in terms of financial performance, acceptability in society and brand value.