JSW Steel, the flagship company of the diversified JSW Group, will expand its production capacity in the country by 10 million tonne to 36 million tonne per annum (mtpa), with an estimated investment of Rs 20,000 crore. Further, the firm would also spend another Rs 16,000 crore for capital expenditure next year.
“The capacity expansion would be from 26 mtpa, which would be about 7.5 mtpa at Vijayanagar and 2.5 mtpa at Bhushan Power & Steel (BPSL). These would be met through internal cash flows. The capex for the last fiscal stood at Rs 15,000 crore. Last year, we increased capacity to 23 mtpa from the earlier 18 mtpa, and adding BPSL, our total would be 26 mtpa,” JSW Steel joint managing director and group CFO Seshagiri Rao MVS said.
JSW Steel is planning to expand capacity to 5 mtpa by FY24 from the present 2.7 mtpa, he added. The firm is also expecting the merger of Monnet Ispat & Energy (now JSW Ispat Special Products) to add 1 million tonne to the overall production capacity, taking it to 27 mtpa.
Of the total capex for the year, JSW Steel will invest about Rs 3,400 crore for expansion of its greenfield facility in Odisha, which includes expansion of mining capacity, to automate it and buy new equipment, among others. “We are also investing in a slurry pipeline. As far as the integrated steel plant in Odisha is concerned, we will take up the project once the land is handed over to us. That will take some time,” he added.
Talking about the synergies the merger of JSW Ispat Special Products and JSW Steel merger brings, Rao said that JSW Ispat doesn’t have a coke plant and buys it from the market, while JSW Steel has surplus coke.
“We can supply coke to JSW Ispat. Then, JSW Ispat has slats but doesn’t have rolling facilities, while JSW Steel has rolling facilities. JSW Ispat doesn’t have iron ore, and we can supply it, and then there is the benefit of fixed costs, which would be reduced by 15%. So, I think this is a good integration,” he added.
On plans of turning around its Italian operations, Rao said the firm has already reduced EBITDA losses from €23 million to €7 million.
“But we could not make money. This was due to the lack of orders from the Italian railways. We are expecting orders to come in this year, and if it doesn’t, then we will have to review our Italian operations,” he said, adding its US operations were “already profitable”.
In 2018, the company had acquired the entire stake in three Italian businesses — Aferpi SpA and Piombino Logistics SpA — and 69.27% in GSI Lucchini SpA for €55 million ($64.7 million or Rs 440 crore), as part of its overseas expansion plans. The businesses were bought on a cash- and debt-free basis from Cevitaly Srl, a wholly-owned unit of Algeria’s Cevital SpA.
Talking about the 15% export duties imposed on steel, Rao said it would be temporary, as the country has taken this step to contain inflation. Even though it would have an immediate impact on the user segment, there would not be any permanent impact.
The overall steel demand in India is expected to grow by 7.5% this year, which will translate to 8 mtpa of incremental demand.
“These were mainly driven by infrastructure, government spending and solar renewable projects. We expect revival from the auto sector, mainly passenger vehicles and medium heavy commercial vehicles, while appliances and housing sectors are also doing well,” he added.
