The worst is over, says JSW Steel

By: |
October 27, 2020 12:45 AM

JSW Steel, the country’s second-largest steel maker, believes the worst is over, as there is an all-round improvement in demand across user industries, led by the automobile sector.

Crude steel production in the July-September period stood at 3.85 million tonne.The company also witnessed its highest-ever coated steel sales during the quarter.

JSW Steel, the country’s second-largest steel maker, believes the worst is over, as there is an all-round improvement in demand across user industries, led by the automobile sector.

Seshagiri Rao, joint managing director and group CFO, JSW Steel told FE that while it may still take some time for demand to come up to last year’s levels, sequential and month-on-month improvement in demand from the industry was encouraging.

Rao said that there has been a 33% improvement in steel demand from the auto sector on a year-on-year basis, while compared to the preceding June quarter, there has been a fourfold jump. While the commercial segment is still lagging, demand from two-wheelers, tractors and passenger vehicle segments is upbeat and is expected to continue into the rest of the year, he said. Additionally, the company is evaluating price hikes in its quarterly and half yearly contracts, which include auto.

“I don’t think this demand will weaken in Q3 and Q4. The reason for that is that it is the festive season and also the government’s very focused attention to give either fiscal incentive, or a fiscal stimulus or monetary transmission to the rural India. Therefore, that should stimulate the demand. We do not think this demand will taper down from what we have seen in Q2 and it should pick up momentum going forward. Also, look at the huge improvement in tractor sales in October, so it is not correct to say that there is no demand in rural India,” Rao said.

The value added steel and special products segment, which is used in automobile, appliances, solar and other sectors and constituted 51% of the company’s total sales during the second quarter, grew by 29%. The company also witnessed its highest-ever coated steel sales during the quarter. Value added steel is a high margin business, and Rao said with the increase in demand, there will be a positive impact on the company’s operating income.

In Q2FY21, JSW Steel recorded 61.6% increase in Ebitda at `4,414 crore, and margins surged a good 740 basis points to 23%.

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