JSW Steel Swings to Surprise Profit on Import Curbs, Lower Costs
JSW Steel Ltd., India’s second-largest producer, reported a surprise profit in the fourth quarter after the company sold more metal and prices rebounded on government steps to curb cheaper imports.
Group net income jumped to 1.71 billion rupees ($26 million) in the quarter ended March 31 from 623.8 million rupees a year earlier, the company said on Wednesday. That compares with an average estimate for a 1.4 billion-rupee loss from 17 analysts forecasts compiled by Bloomberg. Sales fell 15 percent to 104.7 billion rupees and beat the 103.6 billion rupees estimated by analysts.
The company restarted its blast furnaces, which were shut for capacity enhancements, boosting crude steel output by 5 percent in the quarter as Indian steel prices rose for the first time in eight quarters. Imports of cheaper goods from China, Japan, South Korea and Russia eased in April after rising to a record of 11.2 million metric tons in the financial year ended March. The levies and floor prices meant to curb imports will start improving margins of mills in the current quarter, according to Reliance Securities Ltd.
“Imposition of minimum import price on various steel products has provided some relief,” JSW Steel said in the statement. “However, the industry sees the need for adequate, swifter and longer shelf-life trade remedial measures to check unbridled and unfair imports of steel into India.”
Costs Tumble
JSW Steel’s total costs fell 18 percent to 96.7 billion rupees in the quarter with spending on raw materials dropping to 47.3 billion rupees from 69.3 billion rupees, according to the statement. The company imports 10 percent of its annual iron ore requirements and buys the rest from the domestic market. Prices of iron ore with 62 percent content delivered to China’s Qingdao port rallied 23 percent during the quarter, according to Metal Bulletin. Spot prices for hard coking coal rose as much as 31 percent from a February low.
JSW Steel shares rose 1.5 percent to 1,309.30 rupees in Mumbai on Wednesday, extending gains to 27 percent this year.
The floor prices on imports have given domestic mills room to raise prices and the impact will be fully realized from this current, Kunal Motishaw, an analyst at Reliance Securities, said before the earnings. The government introduced minimum import prices on some steel products in February.
“As far as steel prices are concerned, the worst is behind us due to introduction of MIP, which will result in higher realizations and lower imports in the coming quarters,” Motishaw said. “Demand is poised to grow with considerable investments expected in construction, infrastructure and manufacturing sectors.”
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