“ Indian steelworkers have even more room for hikes ”: Seshagiri Rao
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- Seshagiri Rao says that where Chinese steel prices rose 60%, EU prices rose 30%, Indian steel prices rose only 19%.
- Rao says he doesn’t expect steel or iron ore prices to drop, although he says some correction could be observed. He sees production cost increase by 12% QoQ largely due to iron ore
- Rao is confident that JSW Steel’s US operations will post positive EBITDA in fiscal 22
Bombay: “The prices of steel and iron ore won’t go down anytime soon!” This is the word of Seshagiri Rao, Deputy Managing Director and CFO of JSW Steel Group. He notes that the rise in prices in other geographies has been much higher than that in India, which means that Indian prices may rise much more from here as well.
“If we look at China, steel prices have increased by 60%, the EU they have increased by 30% but India has seen a price increase of only 19%,” says Rao. He adds that the landed cost of imports is 19% more expensive than domestic prices. According to the World Steel Association, global demand for steel outside China is estimated at 70 million tonnes this year, Rao says supply will not be able to keep up with that figure, making it a case rising steel prices.
The commodity boom has also led to soaring prices for iron ore, coke and other steel raw materials. And Rao sees this impact on the cost of production of JSW Steel. “Our CoP increased 12% year-on-year and 10% QoQ and a majority of that increase is due to iron ore,” says Rao.
Regarding localized lockouts, Rao is confident that any loss of demand will be recovered quickly. “Last in Q1FY21, demand fell to just 12 million tonnes, but rebounded to 29 million tonnes in Q2. I am confident of a rapid recovery this time around as well,” says Rao.
Despite the surge in steel prices, JSW Steel’s US operations continued to show a loss of EBITDA. Rao says the loss has narrowed significantly even in March compared to January and February and is confident that operations will make EBITDA positive in FY22.
Rao says JSW Steel spent Rs. 15,000 cr last year to acquire CAPEX and BPSL and around Rs. 25,000 cr has been allocated for growth CAPEX. He says that the production