Steel market to improve over 6-8 months: JSPL
In an interview with CNBC-TV18, VR Sharma, MD, JSPL, said that he expects the steel market to improve over the next 6-8 months. He explained that companies have started importing less coal in the wake of high prices triggered by Russia's invasion of Ukraine. Sharma, however expects JSPL to make more than Rs 8,000 crore profit each year, going ahead. He also mentioned that the company's current production level stands close to 8 million tonne.
Coking coal prices saw a sharp hike in prices owing to Russia’s invasion of Ukraine. As coking coal is an essential input for the production of steel, Indian steel companies are now in a quandary as a large part of input requirements are met through imports. VR Sharma, MD, JSPL, however, expects the steel market to improve over the next 6-8 months. He also confirmed that he is seeing a net shortage in many countries across Europe.
"Demand is going to be very positive because internationally the steel shortage will continue. For the last one month, we are seeing that there's a net shortage in the MENA countries and Europe at least by 3 million tonne per month. And this is already one month now approximately, and once the war is stopped, I think it will take at least six to eight months for the steel industry to come up," he said.
"So next six to eight months, I am expecting the shortage of 3 to 4 million tonne from Russia and Ukraine to continue in Europe; Europe will have to bank upon India or China and Indonesia in times to come. So, I think the market is going to be very stable, very positive and the prices are also going to be very firm in times to come," he explained.
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He explained that companies have started importing less coal in order to avoid the rise in prices.
"People have started importing less quantities of coal. Now, everybody is apprehending that there can be something tomorrow, especially after a ceasefire is declared between Russia and Ukraine, the energy prices are likely to go down. In the last two-three days, though, the prices have not come down, the offtake and the contracts from coking coal companies to the steel mills are a little slow," he mentioned, in an interview to CNBC-TV18.
Sharma said that the company is targeting a profit of more than Rs 8,000 crore per year.
"We will be withdrawing something about Rs 5,000 crore per year and we will be making a profit of more than Rs 8,000 crore per year. So, that means we have a cash surplus of Rs 3,000 crore per year," he said.
Also Read: Steel prices to see near-term boost; full pass through of energy costs unlikely: Credit Suisse
He mentioned that JSPL is in the process of expanding its capacity and aims to reach 16 million tonne by FY25. The company has already launched a project for six million tonne and is close to 8 million tonne in terms of production.
"The production levels and the sales level - we gave an indication of about 8 million. We are very close to that. Hopefully, we will touch 8 million tonne of production or maybe 1-2 percent here or there," he added.
On its borrowings front, the company aspires to be debt-free. Sharma explained that as far as its Indian operations are concerned, the company will be net debt-free by Q1 of FY23 and for its overseas operations, the company expects to be net debt-free by Q1 or latest by Q2 of FY23. In this respect, he mentioned that the company will be repaying Rs 4,000 crore each year.
"We feel that by June 2022, we will be a net debt-free company in India," he said.
Watch the video for the full interview.
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(Edited by : Dipikka Ghosh)
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