JSW Steel has earmarked Rs 20,000 crore capital expenditure in the current fiscal and hoped that headwinds such as export duty on steel and high coking coal prices are likely to be short-lived, a top company official said.
The leading steelmaker in the country does not expect any "substantial easing" of price of the metal in the domestic market from the current levels, unless the prices of coking coal, a key raw material for the steel manufacturing, moderate in the international market, he said.
The major headwinds are volatile coke price and export duty on steel. However, we expect these to be short-lived. There will be some moderation in exports but value-added steel exports will have less impact. Till now, we remain optimistic and the capex plan of Rs 20,000 crore in the current fiscal remains intact, JSW Steel Joint Managing Director and Group CFO Seshagiri Rao told PTI in a telephonic interview.
The company had earmarked Rs 15,000 crore capital expenditure for 2021-22 as part of its plan to ramp up capacity. Last year, it had also paid over Rs 19,000 crore to conclude the takeover of Bhushan Power and Steel.
Amid high capex plans, the company's debt level will not increase significantly from the current outstanding of Rs 56,700 crore due to "repayments from internal accruals", the official said.
The government has recently waived customs duty on the import of some raw materials, including coking coal and ferronickel, used by the steel industry, a move which is expected to lower the cost for the domestic industry and reduce the prices.
Also, to increase domestic availability, the duty on exports of iron ore has been hiked up to 50 per cent, and a few steel intermediaries to 15 per cent.
If such orders continue for long, there will be under-utilisation of the 150 million tonne capacity in the industry as it was built not only for domestic demand and import substitution but also for exports, Rao said.
"At least 11-12 per cent of the industry capacity is built targeting export markets. And in the current fiscal, we have the potential to double this. Hence, if the export duty continues for a longer period then it may have its consequences on aggressive expansion plans of steelmakers," Rao explained.
Steel exports were 18.37 million tonne in 2021-22.
JSW Steel has plans to ramp up its capacity to 37.5 million tonne by FY25 and 45 million tonne by 2030.
Currently, it has a capacity of around 21.47 million tonne.
Rao said the idea behind the government's move to levy 15 per cent export duty to tame inflation is "appreciable" but the fact is that the "contribution of steel is very limited" to inflation.
"Out of the contribution of manufacturing in the wholesale price index of 64.2 per cent, steel is just 1.27 per cent," Rao said, questioning "why only steel was singled out and no similar measure was taken for non-ferrous metals".
He said export duty on steel was levied back in 2008 and it remained between one and five months depending on the products category.
JSW Steel exports were up by over nine per cent in the quarter ended March 31, 2022.
Speaking about raw materials, the official said the iron ore supplies from captive mines will increase from 46 per cent to 53 per cent this year.