‘Export duty removal may not enable rise in volumes’

Steel exports in H1FY23 dropped by more than 53 per cent on the back of global steel prices falling, and a 15 per cent export duty imposed by the government on May 22. The duty impacted about 95 per cent of India’s finished steel export basket. SESHAGIRI RAO, JSW Steel’s joint managing director and group chief financial officer, told Ishita Ayan Dutt in an interview that the withdrawal of export duty may not increase volumes from India but it will boost sentiment. edited excerpts:

Given the steep correction in global steel prices, do you see exports going up much?

The fall in steel demand is very steep globally and export opportunities are limited right now. In China, the fall in demand was 16 million tonnes

(mt) in the first 10 months of the year. They imported less steel and exports were around the same level; production moderated a bit but it was not sufficient compared to the fall in demand. This is the story, almost across the world.

Globally, the adjustment in production is not sufficient to match the fall in demand, which is putting

pressure on prices. So removal of export duty may not enable an increase in volumes from India, but it provides an opportunity to be aggressive in the (export) market. There are certain pockets where steel demand is growing. The withdrawal of export duty will be a big boost to sentiment.

What is the difference between landed cost of imports and domestic price?

Domestic prices are at a premium to landed cost of imports; landed cost of imports from countries like China is at around ~52,000 per tonne whereas domestic prices are in the range of ~55,000 per tonne.

Global markets have seen a correction of 5-6 per cent. In India, there has been a correction in spot prices; prices in the local market will be guided by landed cost of imports.

What is the outlook on domestic and global demand?

There is good growth in domestic demand relative to what is happening globally. But it is not enough to absorb the fall in exports.

China has introduced a 16point programme to revive their property market. After the announcement, steel prices went up by $10-$15 a tonne in China.

But there is uncertainty around China’s zero-covid policy, that’s why the recovery in steel prices is not that much even after announcing such a large programme in the property sector. We have to see how the situation shapes up.

Will the increase in iron ore prices impact margins in Q3 and Q4?

There is a dichotomy: iron ore prices went up but coking coal came down. For Q3, we have guided that coking coal prices will come down by around $80 per tonne over Q2. That will definitely happen.

In November, we are seeing a correction in coking coal. If the trend continues then on the cost side, I don’t see a pressure.

Would the export duty removal prompt you to review it?

Our Ebitda in the first 6 months was only ~6,000 crore, a significant reduction from last year which is why we moderated the capex. It is not possible to recoup what we have lost in the first half. I don’t think we will revise what we have moderated this year.

But does the withdrawal of export duty give you comfort to carry on with the 10 million tonne capacity addition by FY25?

Yes, our exports are always in the range of 20-25 per cent (of sales) unless the global markets are bad.

The export duty withdrawal will definitely open up markets. There may be a problem for a year as far as global markets like the US and Europe are concerned.