Steel prices are strong as ever, but tell us what kind of realisations have you been seeing, on long products especially? Have we seen a full recovery from the February blip?
Worldwide, the steel industry has been passing through a different time. You see after the lockdown was lifted, the entire world started working to recover their losses. Europe was down for four to five months, the American industry was also down for three to four months, so is the steel industry in Korea, Japan and also in other South-Eastern Asian countries. China was down in the month of December, January and February, but from March they started seeing V-shape recovery. This is what India needs to do now. India was also down in the first quarter April, May, June and part of the second quarter. But we have seen good recovery in demand, as well as in overall consumption from September onwards.
The entire world is working on how to make up for the losses. This is the reason, be it large organisations, or the small-scale industry, MSMEs, automotive, infrastructure companies, everybody wants to recover their losses – what they lost during pandemic or during lockdown. That has created a shortage of metals, steel and many other items worldwide. Over and above the shipping costs have gone up. All other consumables, all the input costs have gone up. It is not only steel; be it copper, aluminium, building material products, wood, plywood, laminates, everything has gone up
This is the reason today the world is seeing a great inflation and it will take two years’ time to cool down. This is a real demand, not a hoarding. This is a true demand and most of the demand is coming from the infrastructure companies, as well as from major OEMs.
The fact that you have posted a 37% jump in the fourth quarter is testament to the strong demand in India for steel. However, could the resurgence in COVID cases put that demand momentum on hold?
If you see JSPL’s track record in April, May and June, we did export about 80% to 85% of our total produce and we are geared up to export again if the situation persists. But at the moment, I personally feel that this kind of situation will not come because countries already have vaccines and Government of India has already allowed all 45-plus people to get vaccines, which is a great relief. Within next six to eight weeks’ time we will find that the overall number of patients or number of infected people will be reduced and countries will not face any further lockdown.
It will be most unfortunate if the country faces lockdown and I feel that situation will not come. Yes, in Maharashtra it is quite alarming. But Government of Maharashtra is taking due care and so is the central government. The knowledge to handle COVID and knowledge to find the means are much more available now than what we had a year back. So, we are now educated enough. We can handle it. We can control it and we can definitely treat it.
You posted a highest ever steel production and sales with 100% capacity utilised. What is the room for value momentum in FY22 capex plans?
We have reached to a level of 7.5 million tonne now and last year we were at 6.3 million tonne. Last to last financial year we were at 5.5 million tonne. So, a journey from 5.5 million tonne to 6.3 and then finally 6.3 to 7.5 million tonne is a growth of around 18% and sales growth is above 20%. As far as the room is concerned, for further extension or further increase in production, without spending or putting any capex, we feel that we will be in a position to deliver about 9 million tonne from our plants and that is the ultimate goal. This is what I can say today. We still have room for 1.5 million tonne.
Hopefully the current financial year we will touch 9 million tonne. If you see our production in the last quarter, it is 2.07 million tonne. If you multiply it by 4 – 4 quarters – then we are already at 8.35-8.4 million tonne. With little changes in the system, in the product mix and in the overall strategy, we will be in a position to reach to 9 million tonne. This is what we are expecting in the year 21-22.
Has bringing down debt to the 15,000-crore mark been a continued priority and when do you aim to do this by?
It is not too far away now. In the last month (March), we did a sale of 5,300 crore and collections – that is money flowing into the company – 5,150 crores. So, if we repeat it 12 times in a year, then we will cross 60,000 crores. But let us not be too bullish.
I am working on a strategy: 15, 15 and 50. That is 50,000 crores of our total sales turnover which I am sure we will get in 2021-22, and the other is 15,000 crore of EBITDA. I am very confident that we will achieve 15,000 crore EBITDA in the year 2021-22. The next is how to bring down the overall debt on JSPL to a level below 15,000 crore. This is also very much in line.
We have aligned ourselves to find out the ways and to chart out the roadmap as to how to do this 15, 15, 50. If this happens, and this is going to happen, we become amongst top 10 companies in the country in terms of overall ratios, overall debt level and the profitability level. This is what our aim is – to become top 10 industry, top 10 companies in the country across all sectors, not only in steel.
Is the price at which you are procuring iron ore from OMC lower? Is this cushioning some of the iron ore price surge for you?
What is happening today is that the whole world is back. Be it iron ore, scrap, HBI, DRI, pig iron, all metals, ferroalloys. And each and every consumer, customer, steel mill or any other metal industry is buying more. Why are they buying more? They are not hoarding or stocking, each and everybody is consuming. This means there is demand.
You are seeing that Rs 1,23,500 crore in the GST collection in the last month. That is very positive news. We feel that GST must reach to a level of Rs 1,50,000 crores in the month of May. This shows that there is huge demand. It is not only pent-up demand. This is realistic demand and will definitely increase the input costs because it is a chain, it is a cycle. When the consumers go and buy steel, then the complete value chain behind and the value chain downwards is always affected and we cannot control it. The whole world cannot control it.
We have seen what has happened in the Suez Canal. For two weeks the entire world came to a halt and trillions of dollars of the total volumes were stuck up in the Mediterranean Sea and in the Arabian Sea. This has disrupted the entire supply chain of the world. More than 70% of the world’s movement is taking place from the Indian Ocean and it was affected very adversely, I would say.
The point is that when the raw material prices go up, the demand goes up, when the buyers are confident of the respective economy of their country, then these prices are bound to increase. In most of the developed countries, they have already declared lot of stimulus packages. America has done more than three trillion dollars, China has done about five trillion dollars put together, so have Japan and Korea declared trillions of dollars. Indian government has done much more than many of the world’s economies. More than Rs 30 lakh crore is going to be spent to give a boost to the industry in terms of infrastructure, supporting MSMEs and supporting the manufacturing sector.
I think there is time to give a big boost to the manufacturing sector, and manufacturing is the base for any economy in the world and this is likely to happen. So, the incoming, outgoing prices there is no control as of now. We definitely try to be very reasonable and customer friendly so that our customers do not feel a hit in terms of prices. Regarding raw material prices like iron ore that you asked, OMC, NMDC are private miners in the vicinity in Odisha and Chhattisgarh, they are supporting fully. There is no export of iron ore today, barring very few low-grade iron ore that is being exported. But otherwise, the situation is under control and the raw material is available.