BL interview. India cannot decouple from global slowdown: JSW Steel Joint MD

Not only JSW Steel, but the entire industry has been affected. Exports have already fallen more than 50 per cent from 90 million tonnes (mt) last year. In July, India became a net importer than a net exporter. The government should remove duty on products where the domestic capacity is higher than demand. The industry has given the data and is waiting for a decision. Compared to 2008, this is the longest period of export levy the industry is facing.

Domestic demand was higher by 5 mt, but production increased by 3 mt and exports have fallen by 5 mt. The production could have been higher if the exports were robust. JSW Steel has commissioned 5 mtpa fresh capacity that went into stream in the second half of last year. Now, the ramp is complete and can operate at better capacity utilisation but we are operating at 87 per cent. If we produce more, it cannot be absorbed in the domestic market. This is the story for majority of flat steel producers.

Buying has started after August, but long product demand is still subdued due to the prolonged monsoon. Last year, India consumed 49 mt in the first six months of the fiscal and this year, this would be 56 mt. However, the last first quarter was hit by the second Covid wave. So, these numbers are not comparable as such. Even if the consumption in the second half of this fiscal is the same at 56 mt of last year, it would be 8-9 mt of higher demand for the industry. All this is on the back of 5-6 mtpa of additional capacity started last year. This has led to lower capacity utilisation. JSW Steel will be running at 87 per cent capacity utilisation if exports are not opened up.

Domestic prices are pegged to the landed cost of imports. Globally, prices have fallen by 30 per cent and India has mirrored it. Prices have stopped falling globally and even in China there is stability in prices. Iron ore prices came down to $95 a tonne and went up to $107-$110. Coking coal also came down and went up to $75-$80 a tonne. Input prices are adjusting to demand. I do not think steel prices will fall further given the way reduction has happened. Globally, China produced 97 mt last May and this had come down to 81 mt in July this year. The rest of the world produced 73 mt last May and it slipped to 67 mt this July. Production is falling across the globe to adjust with the demand.

The cost is very high. Energy prices are going up. The cost of steel production is remaining at a higher level. With these prices, at least the downside in steel prices is protected. The global outlook is also not encouraging. The liquidity available is getting squeezed. Interest rates are going up and we are seeing a slowdown across the globe. India is behaving differently, but that does not mean steel prices will go up independently. But prices will not fall because of high raw material prices.

No, I do not think so. We are more integrated. Our imports are $600 billion and exports are $400 billion. This means our size of global exposure is about $1 trillion. For aneconomy of $3 trillion, an export and import trade of $1 trillion is sizeable. We cannot say whatever is happening will not affect us. It will have some rub-off effect on the global economy. We would have growth much better if not for the global recessionary trend. We have to be cautious.

It may happen as it did in 2016. At that time, it was dumped by China entirely. Today, there are some distressed cargos from Russia but they are not very large. China is more disciplined now than it was earlier. We are watching imports and if it goes out of tune we will move the government. Even though there is 7.5 per cent import duty, the majority of imports are duty-free from FTA (free trade agreement) countries. Korea and Japan are the major exporters to their downstream units in India. Posco has a downstream unit in India that imports from Korea, process it and sell it in India. Most automakers import from their parent overseas.

I do not think so. At least JSW Group is bullish on India’s growth. We are running a capex of ₹50,000 crore in steel alone. JSW Energy is investing ₹10,000 crore. In cement, we are expanding from 17 mtpa to 26 mtpa. Similarly, we are investing heavily in paints, ports and the power sector. Many companies are deleveraging at the cost growth. We are investing and creating more capacity.