Metals giant JSW Steel Ltd's Joint Managing Director and Chief Executive Officer Jayant Acharya said in an interaction with Moneycontrol that the recent upward movement in steel prices is expected to hold, as China introduces measures to improve consumption at home, and in India, infrastructure projects are expected to ramp up after a slow April-September marred by election and monsoon-related sluggishness.
Acharya said during the interaction that due to pressures from imports, and the lack of major road and infrastructure projects being awarded in the first half of the ongoing fiscal, steel prices had become "irrationally low".
Along with a few other steel players, JSW Steel increased prices for its long products by around Rs 1,000 per tonne earlier in October, as it sought to capitalise on demand from real estate and infrastructure projects. At the same time, analysts say that there have been signs that Indian flat steel products are being traded at lower prices compared to Chinese and other imported products.
"If you were to look at where we started in July, and where we ended in September, the prices went down primarily because of the import pressure which came into the market, and a seasonal monsoon and weather disruption. Once the budget was announced, the capex spend slowly started coming from the government side, and that we are seeing as a reflection in the long prices," Acharya told Moneycontrol.
He added, "We are seeing activities now in the infrastructure side, as government spending is coming up. The government has announced Rs 11 lakh crore of expenditure this year. Out of that about 40 percent has been spent in the first half, as we understand, the balance 60 percent is back ended. So therefore, this will result in a pickup in a good demand in H2".
Due to election-related disruptions earlier this year, as well as financial issues plaguing the National Highways Authority of India, such as high debt, only around 1,100 kilometres (km) worth of road projects have been awarded in the first half of FY25 by the Centre, and awarding for this year is expected to fall far short of the target of 14,000 km. In August, Nitin Gadkari, the road transport and highways minister, said that he expected the Ministry of Road Transport and Highways (MoRTH) to close FY25 with road contract awards worth Rs 5 lakh crore.
As far as steel imports are concerned, Acharya said that the stimulus measures introduced by China, which includes mortgage rate cuts, is seen as a net positive for the industry, as improved domestic consumption may reduce exports out of the world's largest steel producing country. He added that the recent cut in steel production in China is also encouraging in terms of visibility for pricing growth. In August and September, Chinese steelmakers produced around 77-78 million tonnes of steel each month, lower than the usual 90 million tonnes.
While investors and analysts have been encouraged by price hikes in steel products, some have expressed skepticism as to whether the price hikes will actually hold going ahead, as China is yet to undertake more fundamental reforms to segments such as real estate, especially on the supply side. That may result in a continued pressure from Chinese steel exports to India, and a more rangebound behaviour in terms of steel prices.
In an investor call after its Q2 FY25 financial results, Acharya told investors that the Indian Steel Association, which JSW Steel is a part of, is continuing to engage with the government regarding more trade measures to level the playing field against cheaper, imported steel. Earlier this year, the government imposed countervailing duties on imported steel pipes, heavily used in real estate and infrastructure projects.
During the interaction, Acharya said that the company is continuing its quest towards achieving more sales in the institutional segment, underscored by its recent acquisition, along with its joint venture partner JFE, of German steel giant Thyssenkrupp's grain-oriented electrical steel facility in Nashik. Grain-oriented electrical steel is extensively used in making transformers and generators.
(with inputs from Yaruqhullah Khan)
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