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Last Updated : Dec 06, 2013 09:55 PM IST | Source: CNBC-TV18

Worst over for steel sector; gross debt at Rs 21000cr: SAIL

SAIl‘s current gross debt stand at around Rs 21,000 crore and the company expects its capacity to reach 18.5 mt by FY14-end.

In an interview to CNBC-TV18, CS Verma, Chairman, SAIL said that the worst is over for the steel industry. Steel companies in India and globally have upped prices by Rs 1,500-2,000/tonne and USD 15-20/tonne respectively, so one should expect better realisations.

He further highlighted that in 2012, global crude steel output went up by 0.7 percent, but in the first 10 months (January to October) of the current calendar year, the growth steel production globally is 3.2 percent.

SAIl’s current gross debt stand at around Rs 21,000 crore and the company expects its capacity to reach 18.5 mt by FY14-end.

Meanwhile, Verma who is also officiating as the head of state-owned miner NMDC, said that company has increased prices of both fines and lumps by Rs 200/tn for December and is confident of achieving 30mt in FY14.

Also Read: Outperformance over, time to book profits in metals, says Nomura

Below is the edited transcript of CS Verma’s interview with CNBC-TV18

Q: How your margins are expected to pan out as we head into the second half of the year? In the quarter gone by Steel Authority of India (SAIL) reported its lowest EBITDA per tonne for the past 26 quarters and we have spoken about the pressures that you have been facing for a while. Do you see this pressure continue in the second half?

A: The worst is over for the steel industry and prices have moved up a bit in last couple of months. Even the steel companies in India have increased the prices for their steel products in last two months by about Rs 1,500-2,000/tonne. Even globally, steel prices have gone up by about USD 15-20/tonne.

Input prices have also slightly gone up. In the times to come, we should get better realisation because steel industry is passing through a very challenging time, because global capacity utilisation has been only about 78-80 percent, meaning thereby that there is 20 percent surplus capacity available in the system. If you see the data now, it is on the path of revival. In the year 2012, global crude steel output went up by 0.7 percent, but in the first 10 months of the current calendar year, January to October the growth in steel production globally is 3.2 percent.

Q: You have some expansion plans as well, so your dependence on imported coal is likely to go up. Can you just give us how much you will be looking at imported coal going ahead and whether that will put pressure on your margins?

A: Today our imported coal requirement is somewhere about 12 million tonne. We are meeting two-third of the requirement of imported coal through imports from Australia and remaining from USA. Post expansion, our coal requirement will go up to a level of about 18 million tonne, so our production will also go up.

In fact, the coking coal prices had come down. From the peak level of about USD 300/tonne about two years back, today it is hovering around USD 140-150/tonne for imports from Australia and US coal prices are hovering around USD 130/tonne. Coal prices have come at historic low. Input prices have come down and realisations are slightly picking up. So, it gives me a positive outlook as far as the margins are concerned.

Q: What is your inventory at the moment?

A: Inventory is about 1 million tonne and that is needed in the system. We are having largest marketing network in India. We have about 3,000 dealers and 54 stockyards all over the country. So, we have to have some feedstock. This is the minimum inventory which we require.

Q: Jindal Steel & Power (JSPL) increased its prices, but you guys didn't. So is it because of the inventory situation that you did not raise your prices?

A: No, all the companies have increased the prices. In the last two months even our company has increased the prices by about Rs 1,500/tonne. By and large, the increase in prices has been same by all the steel companies in India.

Q: Can you tell us when your new 8 million tonne capacity will come on-stream? When is the start?

A: Today our capacity has already gone up by about 2.5 million tonne because we have already commissioned the blast furnace in Rourkela steel plant. This is 4,060 cubic meter blast furnace and is the largest operating blast furnace in India. With the start of the blast furnace in Rourkela steel plant our hot metal capacity which used to 40 million tonne has gone up to about 70.5 million tonne.

The second blast furnace is expected to be commissioned before the end of the fiscal in our IISCO Burnpur steel plant. By the end of the fiscal, our capacity will go up to a level of about 18-18.5 million tonne. The last blast furnace of the current phase of the modernisation and expansion is scheduled to be commissioned next fiscal.

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First Published on Dec 6, 2013 12:24 pm
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