Hope MIP is extended to other steel products like scrap: JSPL

Jindal Steel & Power expects the government to extend the minimum import price (MIP) levied on certain steel products to others such as scrap, MD and CEO Ravi Uppal says.Speaking to CNBC-TV18, Uppal said following a rebound in the first quarter of FY17, steel prices had lately again come under pressure even as a recovery may be seen post monsoon.The company saw volumes grow by 7 percent in the first quarter.Uppal was optimistic on demand for long products and said JSPL expects domestic steel consumption in the country to grow by 5 percent this year.He also talked about the company's debt picture and the deals with JSW Energy and Sarda Mines.Below is the transcript of Ravi Uppal’s interview with Sonia Shenoy and Anuj Singhal on CNBC-TV18.Sonia: Can you tell us whether the turf has improved at all? What are the steel prices currently and how much have they moved over the last couple of months?A: The Indian steel market is a very seasonal market. Right now, we are in the middle of monsoon. This year, in the month of March and April, there was a substantial uptick in demand, but in the later part of May and June, the demand was stable and somewhat subdued.This is something which is along the expected lines and we think that the general outlook of the Indian steel market is pretty stable. The good news is that the imports in Q1 have gone down by 29 percent and the exports have gone up by above 9 percent. So, all-in-all it was good for the Indian steel market.As regards to prices, prices have also followed the demand curve. Since we are in Q2, the market demand has been subdued, so therefore, the prices are also proportionally lower compared to what they were in the first quarter. But this is something along the expected lines and we do see recovery of prices towards the end of the monsoon.Anuj: So, in terms of your steel business, what does this mean in terms of your margins, inventory gains, if you could give us some ballpark numbers?A: I am not in a position to give you the numbers because we still have not announced our first quarter results, but I would say that in the first quarter, on a consolidated basis, our total steel production was higher by about six percent and compared to the same quarter last year.We remain optimistic about the steel market and especially the demand for the long products, which is basically the structures, wire rod, fabricated structures or rails have shown a better uptick. That is the area where JSPL is, in particular, quite strong. So, we are satisfied about it and the government is investing a lot of money in roads and rail segment and both of them bode well for our business.Sonia: You spoke about a production growth of about 6 odd percent. Can you give us what the average sales volume growth could be for the steel business over the next 3-6 months? Q4 was a good quarter for you; you saw more than 20 percent growth in your standalone volumes. What is the expectation for the next couple of quarters?A: If you look at the Indian steel industry as a whole, during the current year, we expect the consumption to go up by about 5-6 percent. And I would reckon that JSPL should grow at decent double digit when it comes to the physical volume of all the steel that we produce. And we are well on the way to do that. Let us hope that our exports are able to increase.As far as imports are concerned, we hope that they do not grow, minimum import price (MIP) should continue or any equivalent of MIP like antidumping should be put in place. There are a lot of items which are still not in the MIP list and we will request the government to consider those items also within the scope of MIP.Indian steel industry must grow when the demand grows and for that the MIP must be in place to make sure the Indian industry is protected because the global market is still in a state of flux, is still at the whims and fancies of the Chinese producers and their own domestic demand and supply. And we need to insulate the Indian steel market against the rapid fluctuations on the Chinese side.So, we have got to remember that India is soon going to become world’s second largest producer of steel and it is very much in the spirit of that that we need to protect the Indian steel industry because finally that is going to serve us well. If we have to build up an infrastructure, it must be done with the Indian steel.Anuj: I wanted to know the update on the Sarda mines where the ruling was in your favour and there is a lot of idle inventory over there. Have you got full access to that paid up inventory?A: Yes, it is very much on the way and it will soon be there. It is ours and it will certainly be there with us.Anuj: You said it is on the way, so as of now, you still do not have access to that?A: Not at all. There are certain things, which are in process and it is happening. We got the court order in our favour and it is going to happen.Anuj: Any timelines?A: I wish it was yesterday, but it should happen soon. I cannot make these conjectures.Sonia: How much is the inventory currently and how much will that add to in terms of your steel margins?A: We have about 14-15 million tonnes of inventory there and this is a stock for which we have already paid. It is our stock. I cannot tell you about margins, but obviously it is our stock and we will definitely draw up on that.Anuj: Which are the other products, which you want to be under MIP and have prices in some of these categories already gone back to the pre-MIP levels?A: The products I am referring to is basically, if you look at American Petroleum Institute (API) grade 52 and above, it is still being allowed whereas it is being manufactured in India. Some structural products, rails and also, scrap is being imported. So now that we have plenty of iron ore in India, we should encourage the iron ore based steel production.The prices of iron ore are also stable, quite favourable. So, some of these items, if we can make sure that MIP also applies to them, it will be a positive sign for the Indian steel industry to grow. And there is no reason why we should continue to import the iron ore.The good news is the iron ore imports have also come down dramatically considering that in the last one year, the iron ore production has increased by 20 percent, another 65 million tonnes of iron ore mining has been added now. So, with all those things, the Indian steel industry has to be more focused on our own resources. That will make us more competitive.Sonia: Let us also talk a little bit about the balance sheet, because that has been the biggest concerning point for most investors. What is the debt currently now on the books. The last time we checked, it was somewhere around Rs 46,000 crore and with this deal that you struck with JSW Energy, the divestment of your Chhattisgarh power plant, has that made things easier for you in terms of refinancing of your debt with the banks and how much of debt have you refinanced up until now?A: The total debt broadly remains the same as we had at the end of last quarter. As we mentioned earlier, we are not making much capital investment.As far as the JSW deal is concerned, it is in process, it is under execution and as far as the other debts are concerned, I am happy to tell you that our 5:25 scheme is implemented for both power and steel. So, everything seems to be on course and we are moving ahead with that.Sonia: Can you tell us by the end of FY17 and even FY18, where will your debt stand at?A: It is hard to tell, but as I said, since we are not making much capital investment, I would expect the debt levels to remain the same as we had at the start of the year.Anuj: Q4 was exceptionally bad for your power business. You referred to that in passing, but for FY17 as a whole, what is your outlook on power business?A: Power business performance will depend as to how the demand is. Right now, once again the monsoon has just set in and this quarter, the demand is normally subdued compared to other quarters. But the demand for power is gradually coming up and we are also getting more medium term and short term contracts, also trying for the long-term. So, I do think that the performance of the power segment this year should be at least as good as last year and there should be margin improvement that we should expect.But everything hands-on as to how many-term power purchase agreements (PPA) inquiries come and I am sure that with the implementation of Ujwal DISCOM Assurance Yojana (UDAY), maybe in 3-6 months time, more and more inquiries for the PPAs will be generated by the state utilities.Anuj: So, how many do you hope to sign over the next one year or so and if you could give us any update on that?A: While it is hard to tell. The inquiries are yet to start, but a lot of confidence is coming in to the state utilities. Those states, which have agreed to sign the UDAY scheme, they have already looking at the demand question and medium-term and the long-term PPAs, I am expecting the inquiries to start in about 3 months time.Sonia: Since you mentioned that a lot of your debt has been restructured through the 5:25 route, can you tell us exactly what that quantum is of debt that has moved to the 5:25 route?A: As far as the power business is concerned, we have the 5:25, which was done already last year and we are right now in the process of executing the 5:25 for the steel business. Both of them put together, it is more than about Rs 12,000 crore.