Ladies and gentlemen, good day, and welcome to the Q4 FY 2022 earnings conference call of JSW Steel Limited. As a reminder, all participant lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then Zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashwin Bajaj, Group Head of Investor Relations. Thank you, and over to you, sir.
Thank you operator, and a very good evening, ladies and gentlemen. This is Ashwin Bajaj, and it's my pleasure to welcome you to JSW Steel's earnings call for Q4 and financial year 2022. We have with us today the management team represented by Mr. Seshagiri Rao, Joint MD and Group CFO, Mr. Jayant Acharya, who is now Deputy Managing Director, and Mr. Rajeev Pai, CFO. We'll start with opening remarks by Mr. Rao and then open the floor to Q&A. With that, over to you, Mr. Rao.
Good evening. We welcome you to the briefing of our Q4 FY 2022 performance. In the beginning of the calendar year 2022, we expected stability and a recovery from the disrupted supply chain situation caused by the COVID and other developments. This assumption was based on very strong recovery that had been seen in the year 2021. Unfortunately, the conflict between two large commodity exporting countries, Russia and Ukraine, and also the slowdown in the second largest economy in China, both together really exposed several fault lines that choked the commodity supply to the global manufacturing industry. It has created a huge amount of issues which were not anticipated.
In this situation as far as India is concerned, quarter-over-quarter, the steel consumption picked up, and we have seen over 7% growth in India's steel consumption. In spite of all these issues which arose due to the conflict between Russia and Ukraine and slowing Chinese economy, JSW Steel has performed quite well with highest ever volumes of production and sales. On a standalone basis, we could achieve 5 million tons, 5.01 million tons of production, crude steel production, which is a 30% growth sequentially. The sales without VVSL, 5.13 million tons, which is a 31% growth. We could reduce our inventory by almost 386,000 tons in the last quarter.
If I see year as a whole, we have achieved 17.62 million tons of production, almost 97% of the group, 95% of the guidance which we have given. In the sales side for FY 2022, we achieved 16.35 million tons. Again, 95% of our guidance. In the last quarter, because of the drop in global steel prices, Indian steel prices also, there was volatility. Overall, we have seen in our blended realizations coming down by 3% quarter-on-quarter. At the same time, coking coal prices surged globally, which had an impact on our costs. Costs went up. They went up quarter-on-quarter by 3%. The impact of lower blended NSR and higher blended cost had an impact on the EBITDA per ton on a standalone basis.
It came down by INR 3,475 per ton. It was INR 13,505 per ton. At the same time, as far as the domestic subsidiaries and global subsidiaries have done reasonably well. We have made an EBITDA of $39 million in our U.S. plate and Ohio operation. We have reduced the losses in our Italian operation to EUR 1 million in the last quarter. With this, the EBITDA on a consolidated basis, including Ocean Power and Steel, was INR 9,184 crores.
What is notable here is that in spite of drop in EBITDA per ton, the volumes which we have achieved has made us to maintain or show a 1% growth on a Consolidated EBITDA to INR 9,184 crores as against INR 9,132 crores in the previous quarter. There was an exceptional item of INR 741 crores. We have impaired our investments in West Virginia coal mines. When we acquired these coal mines in the year 2008 and 2009, and thereafter, our minimum commitment in each year were agreed could not be done, so there was not enough resources in some years, there were some difficulties in some years. There was a dispute which was going on. We lost in arbitration.
Due to which we had to make provision towards impairment of these investments. A small impairment in the assets in India, in the Jharkhand state where we had made some investments. Total together is INR 741 crores in the consolidated accounts, where we have made the exceptional impairments here. After adjusting this INR 741 crores, the profit after tax was INR 3,343 crores. Even the EBITDA was higher sequentially. The profit after tax came down quarter-on-quarter, majorly due to this exceptional item which I just explained. Commissioning or capitalization of the expansion at Dolvi. Incrementally, interest and depreciation has also come in this quarter. That's why you find profit after tax was lower compared to previous quarter.
What is also important here is that our net debt was brought down to INR 56,723 crores. We have repaid INR 9,589 crores in the last quarter. Also debt to EBITDA, debt to equity, everything has improved quite substantially relative to the previous quarter. Debt to EBITDA was 1.46, and debt to equity was 0.86. Our weighted average cost of debt also has come down to 5.67%. The acceptances on revenue account has gone up to $2.1 billion. As you are aware, the coking coal prices have gone up. Due to which, even though the volume of imports have not gone up, in relative terms, the acceptances have gone up on revenue account. The capital account, we have brought down our acceptances further down.
Outstanding was only $27 million as on 31st March 2022. The capital expenditure program which we had undertaken, many of the projects got commissioned, including five million tons at Dolvi. It ramped up quite well in the last quarter. What is yet to be commissioned, if we look at it, Vijayanagar five million ton expansion, which is going on. Similarly, Konkan plant, three million ton, is in advanced stage of implementation. In the downstream, at Vasind, Tarapur and Kalmeshwar, excepting CAL and TIN line, balance all commissioned. Bhushan Power & Steel expansion to 3.5 million ton will get completed by September of this year. 3.5-5 million ton expansion is also underway. That will get completed by FY 2024.
Capital expenditure in the current year will be INR 18,000 crore, we'll be spending on these projects in JSW Steel. Another INR 2,000 crore in Bhushan Power & Steel, so total together, INR 20,000 crore. Considering the excellent performance for the year as a whole, where we have made the highest ever net profit for the year of INR 20,938 crore and an EBITDA of INR 39,007 crore. In line with the dividend policy that has already been communicated, 15%-20% of our consolidated net profit, we will declare dividend. This year, the board of directors have recommended for the approval of the shareholders, a dividend of INR 70.35 per share of INR 1 in JSW Steel.
JSW Ispat Special Products is acquired by JSW Steel in the year 2018 September, along with a private equity investor. As you have seen our track record, as and when we acquire any distressed asset in India, we park it as a separate company until turnaround is complete, then we bring into the parent company. The board of JSW Ispat Special Products and also its holding company, which is called Creixent Special Steels, and JSW Steel board of directors has approved a scheme of amalgamation through merger of these two companies into JSW Steel. The appointed date is first of April 2022. The swap ratio has already been communicated to the market.
For every 21 shares of JSW Ispat Special Products, including the conversion of outstanding compulsorily convertible preference shares, you will get one share of JSW Steel. It is 21 into one. Similarly, the holding company, when it gets merged, every two shares they're holding in Creixent, those shareholders will get three shares in JSW Steel. These two together, the number of shares that will be issued after cancellation of the holding held by JSW Steel will be 2.8 crore. There is approximately 1.15% dilution. The guidance for next year, that is this financial year FY 2023. 25 million ton of total steel production, crude steel production, which is a 16% growth over previous year. The sales are 24 million ton, which is a growth of 20% over previous year.
This is what we would like to achieve in this year. The issue which is currently being debated is the imposition of export duty on export of steel from India. In our view, it is a very temporary measure. If you see last precedent in the year 2008, Government of India in similar circumstances where inflation was also going up at that time, imposed export duty on steel. It was different percentages based on grades of steel. Higher the value addition, lower the export duty, 5%-15%. What was important is they withdrew their export duty within a month on flat steel products. For long products, it was there for a few months.
In that precedent, we expect the kind of measure which is taken to contain inflation, which is good for every one of us. Therefore, we feel it is temporary. It will get lifted soon after the things come under control. At the same time, if I look at Indian steel demand growth in the current financial year, we expect it could be in the range of around 7.5% on a base of 106 million tons. There will be incremental demand of eight million tons in India. Also there is import of close to five million tons imports into India is happening. Therefore, it is possible to sell in the domestic market to meet the incremental demand and also to substitute imports. These are the two things which we will continue to focus.
At the same time, it is our duty to service our customers with whom we have long-term relationships globally, where we have been exporting steel for over three decades. We'll continue to do that in spite of the duty that is prevalent today. With these comments, I'll stop here and any clarifications you need, we are all here to clarify. Thank you.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on their touchtone telephone. If you wish to remove yourself from the question queue, you may press Star and Two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder to the participants, please limit your questions to two per participant. Should you have any follow-up, may we request you to rejoin the queue. The first question is from the line of Amit Dixit from Edelweiss. Please go ahead.
A very testing time. I have two questions. The first one is essentially on coking coal. What was our coking coal cost in dollar terms in, for FY 2022? What do you expect it to be in the current quarter?
Last time we told you that there may be a $50 increase in the coking coal for Q3 and Q4. It was $52. Our cost was, the CFR cost was $308. We expect this quarter, current quarter, as coking coal prices really have gone to the roof globally. We expect maybe another $125 dollar impact will come in this quarter.
Great. The second question is on your sales mix. We saw 28% of exports in this year. Now, what have you budgeted for FY 2023? What would be the likely split between semis and finished products this year in FY 2023?
We continue to, you know, budget 15%-20% of our sales as export on an average. Depending on the market situation, it fluctuates. The last quarter, you would have seen the results, the exports are about 21%. Depending on market dynamics, you know, we continue to be flexible to look at exports. But for the next year, I would say it will be around 15%-20%.
Will it be more of semis because duties on semis are not there, or you will continue with the same product mix?
It will be a mix of products which we usually do. I don't think it is going to materially change the mix because today there is a duty and tomorrow there is none.
Our customers with whom we have long-term relationships, because duty has come, we can't say against semis. What we need to do, we continue to service those customers notwithstanding that the duty is there. Okay. Thanks a lot, sir, and all the best.
Thank you. The next question is from the line of Pinakin from J.P. Morgan. Please go ahead.
Just looking at the volume guidance for FY 2023. Basically it implies versus 19.7 million tons of sales around 23.3 million tons, around 3.5 million tons more. Given the export duty, if the export duty is not removed in the near term and export realizations are not remunerative, should we then expect this volume guidance to be at risk, especially given that the Indian demand growth has been lackluster so far?
If you really look at the Indian growth in the last quarter, it has been quite strong. I think the way the projects which have been announced, you know, in the infrastructure space by the government, the announcements are very encouraging. According to us, the announcements will consume about 20 million tons of steel over two and a half to three years. On a ballpark basis, the infrastructure projects should add incremental volume of seven million tons. That is one lever which the domestic market will see. The second lever, as Mr. Rao was also saying, is that the imports which are coming into the country in the range of five million tons is something which can be replaced through the domestic sales.
The third lever is, as we said, we will continue to look at our export volume in a measured way, by servicing customers who have been doing for years. I think with this mix, we are reasonably confident that the measure, which it looks to be temporary to control inflation, we'll be able to sail through the guidance which we have given for the year.
Over and above, I wanted to add, you know, I think it's one side, when we export there will be lower net sales realizations because of the duty implication. Cost side also you have to look at it. When nine more duties were imposed on export, already NMDC reduced the price by INR 720-INR 750 per ton. We expect some more reductions considering international prices and also the quantum of export duty involved. Similarly, if you look at the 2.5% duty on coking coal being not there in future, so that also will give some benefit in the cost.
Even though overall coking coal price is going up, as we are guiding it to $125, if we take into account the benefit of cost that would come in, it will neutralize to some extent the higher duties we have to pay and also the cost reductions also to be taken into account.
Understood, sir. That is very detailed. Sir, just now moving on to the, you know, the question which is on everybody's mind on steel prices. How have steel prices in flat product in India trended in the month of May pre and post the export duty? Basically, how much are prices down from the peak prices that you had in the month of May? And in the near term, what kind of price decline does JSW foresee?
If you look back actually internationally the prices started softening from middle of April onwards. We saw some kind of wait and watch in the international markets as well. Prices have corrected internationally. We see a reflection of that in the domestic market as well. The export duty announcement in addition to that is also causing some sentiment impact as well. We do see the prices correcting, and I think it's difficult to give a number at this stage. We see that the numbers are falling from what we started the month with. We corrected in the beginning of the month, first of May versus the April month price. We corrected our prices by about INR 2,000+ already.
We expect maybe some larger correction to come in between now and the first of June.
Understood. That is very helpful. Thank you very much.
Thank you. The next question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Yeah, thank you for the opportunity. Just continuing on the pricing question. First, is it possible to share what was the April prices versus fourth quarter? Secondly, since the duty, have we begun to pay export duty on our exports or is it on a prospective basis, only? Lastly, what would be the difference in prices of export versus domestic prices at this moment?
First on the export duty, whatever vessels which are under shipment, we would be paying the export duty and shipping it out. Whatever is not customs cleared. Whatever was at the port which was customs cleared, would not need any export duty payment. Whatever we have to clear with export duty payment we'll be doing under protest. Because under clause 1.05 of the Foreign Trade Policy, in the past precedent is there that the LCs which have been issued and contracts valid, those will be allowed to be exempted. That is the assumption based on which we would be paying under protest.
As far as the pricing goes, I think, you know, as I said, the clarification from a pricing we have given this April to May, as I said, INR 2,000 correction has already taken place. In long products, the correction was a little higher. We would be adjusting the prices between now and first of June to reflect the current market trend. But on an average basis, if you recall, December and January prices were quite low entering into quarter four. If you take on an average quarter four and you were to compare with an average of quarter one, I would still feel that we will be better in terms of price realizations ex-plant vis-a-vis quarter four. I won't give the number at this time.
Understood. That's really very helpful. Sir, what would be the price difference on exports after paying export duty today versus domestic realization?
Generally, if you see earlier when export prices were higher, domestic prices have not gone up to the extent of export realizations. The point which I would like to highlight is that domestic prices are dependent upon the landed cost of import. It doesn't depend upon export price. Today, if you look at the landed cost of imports at the prevailing global prices, the Indian steel prices are not at premium. They're almost equal. Therefore, I think that is the right comparison we have to make than looking at export realization due to imposition of 15% duty.
Understood. All right. Second question is on the cost front. I mean, given the overall inflationary environment, apart from the raw material cost, is there any other cost which could hit us in terms of freight, power, other expenses? Number one. Number two, what could be the impact of this recent approval of exports from Karnataka and also our captive mine ramping up? If you could just share your thoughts on these two topics.
Yeah. No, as you have seen that the Honorable Supreme Court has lifted the ban on export of both pellets and iron ore from Karnataka. But that is now ineffective because of this export duty which has come in both pellets and iron ore. As regards to ramping up our capacity is concerned from captive iron ore sources, yes, we are ramping up further. The plan for achieving the guidance of 24 million tons of production, whatever iron ore that is required, 53% will be sourced from captive sources next year. We are ramping up both in Karnataka and also in Odisha.
Understood. All right, sir. Thank you and all the best.
Thank you. A reminder to the participants, please submit your questions to participate. The next question is from the line of Indrajit from CLSA. Please go ahead.
Hi. Good evening, sir. Thank you for the opportunity. I have a few questions. First, have the auto contracts for the April-September half year been finalized already or those are still under negotiations? And how are the prices versus the last half year, that is second half of FY 2022?
We have finalized the auto contracts with some automakers. I think the others are in discussion stage and would be concluded in the next few weeks.
How are the pricing versus what we had in the last half year, say, 2H 2022?
Yes. We have concluded between INR 11,500-12,000 per ton with some of the majors.
Sure. Thank you. Secondly, I want to understand, with coal sourcing, have we been sourcing anything from Russia? And what is the kind of mix, what is the kind of discount we are getting if we are doing any coking coal sourcing from Russia?
Russia, we have been sourcing certain coals in the past as well prior to this Russia-Ukraine conflict. We continue to do the coal sourcing which we've been doing in the past. We haven't really gone up much beyond that as of now because changing the coal blend overnight is also difficult. The logistics challenge also in Russia, you know, because of the shipment from Baltic or from Black Sea has also become more difficult. Even if we want to do more, it may not be immediately possible.
Any price or cost advantage we are getting from the existing portion? Is there a discount between, say, Australia FOB versus Russia, or the discount has expanded versus what it was historically? Any color you can give over there?
Yeah. Russian coals are cheaper than the Australian coals today. As we see the prices have gone down. Their prices into China, which you would see, have been lower post the sanctions which have been imposed on them.
Sure. Third and last question from my side. I know it's initial.
Sorry to interrupt.
Just one small clarification if I can.
Sorry, sir, but we have other participants waiting for their turn in the queue. Thank you. The next question is from the line of Alexandra S. from William Blair. Please go ahead.
Hi. Thank you for taking my question. I was wondering if you can give an indication as to where are iron ore prices locally, and also when we look at steel prices, locally right now, but also in general, is there a spread to China FOB prices? Can you give an indication as to where local steel prices are now in India? Thank you.
Local steel prices in India, I think, the current market sentiments, which are prevailing, it will not be right to give that number as a local steel price today because people are on a wait and watch mode. I would say that the prices which will be announced beginning of June will reflect the right numbers. Between somewhere in the range of whatever is the imported landed prices today as a number, I think is what we would be reflecting around our June price announcements. We'll wait for a few days to let the market cool down and then announce our prices.
Okay, thank you. For iron ore?
No, for iron ore, today the NMDC has reduced the price in the last few days by INR 750 per fines. We expect some more correction that would happen anyhow, even in the normal course, notwithstanding the current imposition of duty. Because the demand for iron ore from China is reducing. That's the reason why the domestic prices are correcting. We expect more correction in the prices in the days to come.
Thank you.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Yeah. Hi, sir. Thank you. I have two questions. First question is, in the prior quarter, we had a provision of INR 1,050 crores. This was pertaining to IBM notified prices. If I remember it right, we had provision till the month of March. I just wanted to have an update on the legal side and the financial impact on the numbers for the quarter, and how soon we can expect this legally going forward. That's the first question.
As we mentioned last time, we have filed a case in the High Court of Orissa. Out of the three issues which we raised, two in our favor and one with a loss. What was in our favor was whether High Court of Orissa had the jurisdiction to decide that, in our favor they have the jurisdiction. The second was when the show cause was issued to JSW, when we clarified by way of a letter. Before that letter even examined, they revised the price, IBM price. Natural justice was not given to us. Therefore, our reply was to be examined afresh. That also has come in our favor, saying that IBM should look at that. The third one, IBM arbitrarily can decide the price or not without considering the bona fide sales made by JSW Steel.
That has gone in itself, saying IBM has a right to decide the price. Now we have 90 days time to go for an appeal to the Supreme Court. We have time up to later part of June. We are examining to file an appeal in the Supreme Court in this regard. In the meantime, as far as accounts are concerned, the case of deciding the IBM price is in favor of IBM. We have made provisions fully, even in this quarter.
Sir, would it be possible for you to quantify it, given it will give us a better sense of actual EBITDA per ton?
Last quarter already we have given that number, over INR 1,000 crores. In fact, the IBM price in this quarter was higher than the previous quarter. It is in the similar range again as far as the total quantum of the impact in this quarter.
Sure. My second question is for Jayant, sir. You indicated INR 11,500-INR 12,000 per ton lower pricing to the few auto majors. I just wanted to understand the rationale behind the price decline. The underlying variable, if you could provide some color on that would be quite useful. Thank you so much.
No, Ritesh Shah. Sorry if I was not clear. This is the, you know, we were negotiating for a price increase with the auto majors since they had a fixed contract in March. The discussion was for the correction starting April 1. What we're discussing is the correction, positive increase, between 11.5%-12%. Let me also qualify that these are few which we have done now. The others are still under discussion.
We are looking at an increase of INR 11,500-INR 12,000. That's right?
Yes. There is a formula which works for the, you know, the prices, how they have moved over the past period, and that, you know, gets reflected in the pricing for the next half or the next quarter.
Okay. This is quite helpful. Thank you so much.
Thank you. The next question is from the line of Satyadeep Jain from Ambit Capital. Please go ahead.
Hi. Thank you. A couple of questions. Sir, thank you for the historical context, going back to 2008. If I understand correctly, at that time, after the export duty was revived, both Tata Steel and JSW Steel makers in general agreed to lower prices by 10% or INR 4,000 per ton at that time, and agreed to keep their prices similar. The entire GFC happened anyway, prices started collapsing. If we look at the historical context and where we are, and obviously government is also looking at some kind of direction or some kind of statement of intent on lowering prices. Can the cost structure is different, pointing to higher coking coal costs also offset partly by lower iron ore prices? Can we?
Looking at that historical context, what are the similarities and what could be somewhat different compared to what we saw in 2008? That's the first question.
No, as far as similarities are concerned, one major similarity is temporary. At that time it was withdrawn, even this time it will be withdrawn. Number two is whether steel companies reduce the prices in the domestic market because there was a duty, export duty. To that point, I wanted to clarify once again that the domestic prices are based on landed cost of imports. Export prices are concerned or realizations are concerned, sometimes export prices were higher than the domestic prices, which was there for the last two years. Sometimes export prices could be lower than domestic price. This is no relationship between the two. The demand supply dynamics will definitely play a role as far as the domestic prices are concerned, so we have to wait and watch how it will shape.
18.4 million tons of exports last year, which was done from India. If you just analyze how much exports can continue to be there in this year in spite of 15% duty. That also, I think is we have to wait and watch how it will shape up. As on date, only thing which we can clarify is that the domestic price is majorly dependent on landed cost of imports. If international prices get corrected, domestic prices also will get corrected.
Okay. Just to follow up on that, one would be if, let's say, the export duty is not lifted in the next few months, you are looking at a large CapEx in this year, actually into next year. Is there a possibility of rethinking or recalibration of the CapEx just in case the market globally remains somewhat soft and export taxes there?
As far as the capital expenditure program is concerned, whatever we have already undertaken where it is advanced stage of implementation, like five million-ton expansion at Vijayanagar or the coke oven plants or the downstream units. These are all the projects which we have taken up earlier, and they're under implementation, and orders have already been placed and LCs are opened. I don't think there's any scope for review as far as these projects are concerned. Then if the export duties continue to remain for a very, very long time, then we have to look at in future what we would like to do. At the same time, it is definitely a loss for India to lose the opportunity that is available right now to increase our export from India and also to meet our domestic demand and creating capacities in India.
Okay, thank you so much.
Thank you. The next question is from the line of Vishal Chandak from Motilal Oswal Financial Services. Please go ahead.
Yeah. Thank you very much for the opportunity. My question was, I mean, with regards to the export duty, generally, what we have seen is whenever such a move is taken by the government, there is a process of consultation, either formal or informal. Was there any kind of an indication from the government on reduction of prices or in terms of providing some sort of an incentive to any of the sector of consumption over there? Or it just came in, arbitrarily without any information, without any consultation?
No, there is no consultation as far as industry is concerned. I don't think on export duties or import duty reductions they will consult the industry. They will take the feedback from time to time about what is happening. The major driver for this decision is the very high inflation in India. We all want inflation to be reduced in India. Therefore, whatever steps that are taken, we support those steps, but we know it is quite temporary and transient.
Just lastly, one more point. After the announcement of this export duty, in the trade market, the prices have corrected very sharply. The indication that we understand is that the correction could be in the range of INR 6,000-7,000 crore and in some cases INR 6,000-7,000 per ton and in some cases even higher. In that scenario, would the prices of steel mills actually adjust to the trade levels, or it could be still higher than the trade levels? How do you look at this scenario now?
I think Vishal, we'll have to. That's why I said that we'll have to wait a little bit for the market reactions to cool down.
Because I think right now, the numbers which are floating around in the market may not be reflective of the real price. We should allow some time for the market to settle down, understand the scenario, and then take a view. I think it would not be right to estimate the price of how much it will go down by. There will be some correction, there is no doubt about that. The amount, I think we would like to wait for a week and just see how it goes, and then announce the price.
Sure. Thank you.
Thank you. The next question is from the line of Vikash Singh from Phillip Capital. Please go ahead.
Good evening, sir.
Good evening.
I just want to understand, our EC limit for all of the mines combined are much higher, but we are still guiding for 53%-54% of the captive consumption. Just wanted to understand, are there any constraint or the outside prices are still so lucrative that we don't want to use our own resources?
No, if you look at total production of 24 million tons-25 million tons, the kind of iron ore requirement will be 50 million tons. If it is 50 million tons, when we say it is 53%, that means we are using full capacity of our captive mines.
Okay, sir. Because I saw in your presentation only from there, that the total EC limit is 45 million tons, all mines combined. It is lower, 25 million tons, you are saying now.
No, at Karnataka, we have only seven million tons of captive. It doesn't make sense to bring all the iron ore that is required for Karnataka from Orissa. Karnataka will always get iron ore from captive and also buy in the local market in Karnataka. As far as Orissa is concerned, if you look at plant wise, as I mentioned in earlier calls, if it is Dolvi, the captive is much more percentage. Similarly, the Salem plant wise is higher, but on average basis if you look at the percentage is 53%.
Understood, sir. My second question that we are talking about import parity prices, but the government still has one bullet, sir, which is 7.5% import duty. Should we take this into account that in case if the domestic prices doesn't come down significantly, then probably that would be removed. We be forced to sell at the parity prices, which would be 7%-8% lower.
Even today, when we say imports into India are five million tons, 70% of this steel is at 0% duty only. That is coming from FTA countries. Even the balance 30%, if somebody analyzes, they're coming under advance license. There also, duty is not there. A significant portion of the imports today are at 0% duty. The 7.5% duty which you're talking about is ineffective.
Thank you. The next question is from the line of Amit Murarka from Axis Capital. Please go ahead.
Yeah. Hi. Good evening. Just your first question is on the export duty exemption for semis. I just wanted to understand, like, is this intentionally exempted or is it more like a temporary oversight and this could, like, be kind of included into the duty structure as well soon enough? How do we think about this?
We'll check with the government, but I think you see, semis, if you look at world over, usually import barriers are not put. For that matter, export barriers reflective of that is not put. That is the way we see it today.
Okay. Okay. Understood. Just, on the auto contracts, like, while I understand some of them in contours, but just going ahead, I was just thinking here, like, given that, export prices are, going to be much lower, let's say, net realization will be much lower, could there be more aggressive bargaining by the auto guys who would actually have a better bargaining power in this situation now to take, let's say, prices closer to export parity than to import parity, just for the auto contracts? While domestic, I understand prices will stay closer to import parity. Just if any thoughts over there as well.
No, I think negotiations apart, what we need to understand is that what we supply to the auto industry is basically tailor-made material in various special grades, which is, you know, made for various parts of their body. It is not something which is overnight replaceable by them, nor, you know, it is something which, I would say they can import tomorrow immediately. The negotiation, yes, I think negotiation the auto industry will do and continues to do. My sense is that their requirement is quite good because their expectation for this year, FY 2023, the commercial vehicle manufacturers have a very good view with respect to the demand this year. Similarly, passenger vehicle, in spite of the chip shortage, we see an increased requirement.
My sense is from a demand perspective, the auto industry will require more steel this year. Negotiation is a part of the business process, so that will continue.
Sure. Thanks. Lastly, could you just specify the number of iron ore revenue booked in the top line this time?
Yeah. Later our investment department will provide that.
Thank you. The next question is from the line of Vishnu Kumar from Spark Capital. Please go ahead.
Hello. Thanks for the time. Just a macro question. Wanted to understand your thoughts as to how you see coking coal behaving for the rest of the year. One more additional one would be that if Chinese cost of coking coal through Russia becomes much cheaper, do you think that their prices could see sharp, sharply lower than what it is now in the second half of this year?
I think the divergence of coking coal prices would not continue for a very long time. You see already, from a demand perspective, there are challenges as far as steel is concerned in the international market. There is a pressure in terms of margins on every steel producer today in the world. My sense or our sense is that the coking coal prices will undergo a correction. In the last two days, if you see, already the prices have corrected almost by $55. Going forward, it will correct. The steel prices are correcting ahead. The coking coal prices should correct with a lag.
Got it. Secondly, on the Chinese cost structure being lower because of the cheap Russian coking coal, how do you see that playing out?
China may have a lower coking coal, let's say, cost from Russia, but I think they have different challenges within the country. You know, which is basically inhibiting some of the manufacturing hubs there to produce. Our sense is that on the kind of impetus which the Chinese government has given of late, the intention is to revive the economy. Therefore, from a demand perspective, the situation will improve. We do not see much steel emanating out of China for exports.
Thank you. The next question is from the line of Ashish Kejriwal from Centrum. Please go ahead.
Yeah, thanks for the opportunity. My question on the global demand scenario we are looking at.
Sir, sorry to interrupt. May we request you to change the handset mode to handset mode, please. Your audio is breaking up.
Yeah, I'm doing that. It's okay?
Yeah, this is fine, sir. Please proceed.
Okay, sir, my question was on account of global demand scenario. We see, when we are looking at some kind of interest rate increasing in U.S. and recession appearing in Europe. Are we still feeling that this could be temporary and we are in the super cycle?
No, I think the super cycle concept in my view will remain intact. One is the demand that is driven by the energy transition, even though it has taken a little backseat right now, but it remains on the top of the agenda. The second is this war between Ukraine and Russia has also triggered for many countries to increase their defense expenditure, which is already quite evident as far as Europe is concerned. They declared as a part of the percentage of their GDP. They wanted to earmark more for defense expenditure. That will also trigger for more steel. Infrastructure spending the world as a whole, it continues to be there. That also is a trigger for steel expenditure.
auto side, there will definitely be a recovery in the EV or in the automotive. In India, we are clearly seeing the passenger vehicles and the medium commercial vehicles. There is a reasonably good demand triggered by infrastructure and mining sectors. Overall if I look at it, the steel demand will remain quite okay. In fact, we are one side talking about Chinese steel demand is falling, economy is slowing down. But just watch the numbers, what is happening in China. Chinese steel production in November 2021 was 69 million tons. Look at the same number in April. It was 93 million tons.
Mm-hmm.
The increase is 24 million tons. Look at the apparent steel consumption within China in the first quarter of this calendar year. It is 8%. 235 million tons of steel consumed as against 212 million tons in the previous quarter. There is increase in demand month after month in China because of the stimulus which is happening. It is not that there is no steel demand at all. There is a slight reduction in the overall steel demand in the rest of the world other than China on a month-on-month basis. That is why the production is getting adjusted in the rest of the world.
The production in the month of April was 70 million tons in the rest of the world as against 73 million tons-74 million tons which you have seen in the previous months. This clearly establishes the fact that China is recovering month after month, so their demand will increase, whereby the threat of exports from China is limited. In the rest of the world, either because of energy crisis or power not available or labor shortages or any other issues that are plaguing the rest of the world, their production adjustments are happening, to the extent the demand, is correcting. Overall I think, things will be still quite okay.
Thanks for this, sir. Second question is on prices. Is it possible to share our current prices versus landed cost of imports and as well as after increase in prices of auto manufacturers by around INR 11,000-INR 12,000, is it still lower than the spot prices?
We usually do not share our prices because it differs from location to location, and it will differ based on product. As we guided, the prices are in line with imported steel numbers, and they will continue to remain in that format.
Thank you.
The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher. Please go ahead.
Thanks for the opportunity, sir. One question on the part of exports. Is it feasible for the buyers to shift to boron steel, boron mixed steel? Because if I understand correctly, there is no export duty on boron-added steel.
I think the alloy steel category is what probably you're talking about. Alloy steel does not have a duty. Alloy steel will continue to be exported by people who require the alloy steel in that format, whether it is boron, chromium combination or whatever they require with respect to their end use. That will continue.
Okay. Can we explore that or we will continue to do what we are doing here?
We are exporting some alloy steels and that is there. That will continue in any case.
Okay. one question on the iron ore or the mines or like, say, global mines which we had. Like earlier, Chile mines were also there, iron ore mines. There also we took a large write-down and like in Mozambique as well. This is the third one where we are again taking some hit there. What's your thought process on the overseas operations? Because there were media reports as well that we are looking to divest European assets. So apart. What's your thought process on those, like, say, overseas assets? Because we are doing phenomenally well, and it has not been a year, like say, over the ages, we have been doing phenomenally well in India.
Why just not focusing on the India and, like say, moving on those assets where the turnaround is very difficult to get through?
No, thanks for the advice. The point remains here is, in the U.S. we have made $200 million EBITDA from the pipe and pipe mill and also from Ohio together. This year we expect things to be better as far as the U.S. is concerned. Then in the case of Italy, you must have seen some news items. Basically here the orders from the Italian railways was getting delayed, and it was not getting awarded quickly. The rail mill there is purely dependent upon the orders from Italian railways. It is mutually dependent. The rail mill dependent on Italian railways and vice versa. Therefore in that connection, if the orders are not forthcoming, then we may have to look at it.
That is the context in which that has been told. I don't think these two operations we have immediately looking at any disinvestment immediately. We continue to evaluate and as you advised we focus majorly in Indian operations and expansions in India. Whatever we have done earlier we will try our best to turn around. If it is not okay then we will get out of that.
Thank you. The next question is from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead.
Thank you, sir, for this opportunity. I just wanted to check on the commissioning of the second CGL line in the Vijayanagar complex, as well as the color coating line. I understand that some of these lines are getting deferred. Could you explain us the issue and when is it likely to get commissioned now?
No, both those lines are commissioned already. At Vijayanagar, as I mentioned to you, excepting coke plant, coke oven plant and JVML primary metal expansion, balance all got commissioned.
Right, sir. I think I was a bit confused. In terms of the JISPL which we are integrating into the company, how would we see the capacity additions at that plant? Do we have any plan there?
After we spent approximately INR 450 crores, today that plant has stabilized at about 0.95 million tons total installed capacity. Another CapEx is going on to the extent of INR 350 crores to expand the capacity to 1.2 million tons. This will get completed by July to September quarter of this year.
Right, sir. Thank you.
Thank you. The next question is from the line of Siddharth Gadekar from Equirus. Please go ahead.
Hello. Yeah, good evening, sir. Sir, India is a sizable player in the seaborne ore and pellet market. With the imposition of export duties on iron ore and pellets, is it fair to assume that domestic prices can fall by almost 50%-60% from current levels? Secondly, would that broadly or partially offset our export duties that we would be paying on the export volumes?
No, the export of iron ore and pellets together in the last year was 25 million tons. 11 million tons of iron ore and 14 million tons of pellets. This time the export duty on pellets will have an impact in our view on the domestic prices. Whether it will come down, how much, I think we need to watch. The INR 750 reduction that has been done by NMDC is too small. We expect more correction in NMDC in low domestic iron ore price, even in Orissa.
sir, is it fair to assume that we could recoup the partially our export duty from the lower iron ore cost given that global iron ore prices will still stay strong because India is a sizable player?
No, the numbers which I gave to you. It is not sizable. 25 million tons to the total, seaborne iron ore you could compare is not sizable.
Given that Ukraine is also out of the market in pellet markets and Russia also there's too much uncertainties. Globally, iron ore prices should remain around this range. Is that a fair assumption?
As far as the overall iron ore demand supply, if somebody looks at it, even in China we are seeing more scrap usage and the domestic iron ore production increase. Both together there could be a lower demand from China for iron ore. Taking that into account, even there is supply side some lower supply, I don't think there will be iron ore prices remaining at elevated levels. In my view, there will be a correction even in this. Because the rest of the world as I gave you, the production numbers are coming down.
Thank you. Ladies and gentlemen, due to time constraint, we take that as the last question. I now hand the conference over to the management for their closing comments. Over to you, sir.
Yeah. What we expect in this quarter is that there will be some volatility in the overall steel prices because of global factors and also the imposition of export duty and the adjustment in the local markets. As far as JSW Steel is concerned, we continue to meet our guidance. Whatever we have mentioned about 25 million tons and 24 million tons, 25 million tons of production and 24 million tons of sales volume. We also see that the ramp up at Dolvi is frozen further. There is captive power plants of 175 MW, another 75 MW . They are getting commissioned just now in Dolvi. That will reduce the cost further down. It is significant reduction in the cost which is going to happen because of this commissioning.
Also the downstream has become fully operational. With all this, we'll be able to improve our product mix, we'll be able to reduce our costs, and we'll be able to increase our volumes. With that, I feel we should be okay going forward. Thank you.
Thank you. Ladies and gentlemen, on behalf of JSW Steel Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.