India’s JSW Steel Expects Margins to Revive After Surprise Loss
India’s JSW Steel Ltd. expects its margins to recover in the year’s second half, underpinned by strong domestic demand and stabilizing prices, after it posted a loss last quarter.
(Bloomberg) -- India’s JSW Steel Ltd. expects its margins to recover in the year’s second half, underpinned by strong domestic demand and stabilizing prices, after it posted a loss last quarter.
Costs of key input materials have started easing, which will be reflected in earnings for the current quarter, according to Seshagiri Rao, joint managing director at the Mumbai-based mill. Global prices are stabilizing due to mills cutting production, he added.
“Domestic demand is very, very strong in India,” Rao said in an interview with Bloomberg Television. “So there will be more volumes and lesser cost of production, stable steel prices and a very strong domestic steel demand. All these four together, we expect the second half to be much better and our margins will get normalized.”
India’s consumption grew more than 11% in the April-September period and JSW is ramping up its production capacity to cater to growing demand, Rao said.
The mill, led by tycoon Sajjan Jindal, last week reported a loss in the July to September period, driven by a sharp slump in prices and high costs of raw materials and power.
While a global slowdown and monetary tightening by developed-market central banks could be headwinds for growth, India remained a “bright spot,” the company said last week. The real estate sector is seeing continued strength and strong demand in the automotive segment, it added,
The company’s shares rose 4.8% in Mumbai Thursday.
Other comments from the interview:
- The company doesn’t expect a further fall in steel prices and rates will be stable
- JSW is getting small quantities of coal from Russia at 15%-20% discount to Australian prices
- Company is conducting a feasibility study with Japan’s JFE Holdings Inc. on grain-oriented specialty steel production in India and will make a call on setting up a facility in the near future
- There is a case for the Indian government to remove an export duty on steel as the material’s contribution to the country’s overall inflation has declined drastically
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