JP Morgan is of the view that steel price hikes in October may not sustain and there could be larger price increases in the second half of the fiscal.
Discussing the price and business outlook, and the situation on the ground, VR Sharma, MD, JSPL, said that in the last two months, construction steel prices were down Rs 1500-2000/ tonne, but the last week of September saw price rise. He is sure of prices trending upwards in October as well.
The prices of coking coal, fuel, are up as well. Prices of critical consumables like graphite electrodes have also gone up. So, the total impact is about Rs 10,000/ tonne, he added.
“Therefore, there is a net potential of Rs 8000 per tonne, to meet our input costs,” said Sharma, in an interview with CNBC-TV18.
He further said, “I am not talking about the price hike we will be taking, but when we see input costs versus realisation, then the delta is about Rs 8000 per tonne. Coking coal prices have gone up from $120-130 to $400 per tonne, which has an impact on input cost. Similarly, fuel prices have gone up, imported steel coal is at about $200 a tonne in India. So, all these factors have resulted in the steel industry bleeding today and it needs at least Rs 8000 per tonne hike.”
On price increase, Sharma said, “JSPL is looking to increase prices by at least Rs 4000 per tonne to begin with, and the rest will be decided based on the pulse of the market. EBITDA at the moment is about Rs 18,000-19,000 per tonne. Going forward, the company is hoping to reach more than Rs 20000 per tonne.”
The company had earlier given an EBITDA guidance of Rs 22,000 per tonne. On that, Sharma said, “Unless the impact of all input costs are absorbed by the market, they won’t be able to reach Rs 22,000 per tonne levels.”
Talking about their international coking coal mines, Sharma said, “We have three coking coal mines - one is Mozambique, the other is South Africa and the third one is Australia. Australian mine has recently started and the first consignment is about to be shipped from Australia to India. We are not going to sell this particular product to the international market. Our first choice would be to bring this particular coking coal to India for utilising it.”
“For this particular year, from Australia, we are looking at only 2 million tonnes and going forward, would improve it to 3.4-4 million tonnes. So, for 2022-23, we are looking to bring in about 3 million tonnes of coking coal from Australia to India,” he confirmed.
For the full interview, watch the accompanying video