JSW Profits Up as Costs Plunge and Govt Helps Keep Prices Up

The fat profit margin recorded by JSW Steel has come into focus particularly when the steel industry has been demanding extension of Minimum Import Price to protect itself from cheap imports.

When MIP was introduced to cover 80 per cent of the imports, it was expected that shipments will fall by at least 50 per cent. However, imports have come down only by 26 per cent. A few variety of TMT bars used in construction sector are being imported as alloy steel which is not covered under MIP.

China’s steel prices have increased 67 per cent to $450 a tonne from $270 a tonne in February when MIP was introduced in India. On the other hand steel prices in India have gone up by only 12 per cent when one compares June quarter with March quarter. In fact, prices in India are coming down since May due to weak demand and onset of monsoon slowing infrastructure activities in the country.

Imports have not fallen as envisaged when MIP was introduced and over 50 per cent of imports have come in below MIP. If you take the current average of 6.5 lakh tonne of imports a month, it works out to 7-8 million tonnes an annum. This kind of imports will derail the domestic steel companies.

It is true that our Ebitda and net profit has gone up when compared to last year, but if you compare sequentially our sales realisations are up by just one per cent. The main drivers for profitability are 12 per cent fall in cost and higher volumes.

Automobile companies have managed to increase prices even as steel prices fell between May-June. This is because auto sales were going up. So to blame it all on steel is not correct.