Govt steps post-budget and festive season will boost demand: JSW Steel

The post-budget measures announced by the government and the ongoing festive season have renewed the hopes of alloy major JSW Steel of better days ahead, though it still remains cautious on investing in new mines.

Since the past few quarters, the steel sector has been hit badly due to the slowdown in real estate, auto and infrastructure sectors. The long and extended monsoon season also played a large role in dampening demand.

"Demand slump is quite evident from the numbers given by the joint plant committee for the first half of the fiscal and it has been going down month after month. We are seeing demand slump not only from the auto industry but also from other key sectors like realty, infrastructure and general engineering," JSW Steel joint managing director and group chief financial officer Seshagiri Rao told PTI.

However, he is hopeful that the series of initiatives announced by the government since the budget that roiled the sentiment for almost every sector, and the ongoing festive season can improve the sentiment, and thus the second half should be better.

Rao also blames the extended and heavy rains for the demand slowdown as the construction sector has come to a standstill.

"Given the recent government initiatives coupled with the Reserve Bank slashing key rates for the fifth time in a row, the second half should be better. However so far we have not seen anything moving on the ground due to the extended monsoons," Rao says.

He, however, notes that though the sentiment may improve, the credit flow into the system will take some more time.

Welcoming the recent NMDC decision to renew the leases of the Donimalai mines in Karnataka, he says this will augment iron ore supply to the raw material starved steel plants in the state. The company has one of its largest facilities in the state.

"We see this as a positive move as it will enhance the supply benefitting the iron ore starved sponge iron/ pellet/steel plants in Karnataka," he says.

Asked if the company is changing its strategy towards the upcoming Odisha mine auctions, he said that "we will continue to be cautious and not aggressive in our bidding."

"We have given a guidance of 1.5 per cent growth this year so we haven't anticipated a big growth in our production or sales numbers," he says when asked whether they will revisit its production targets and guidance for the fiscal.

The company has set a target to increase its crude steel production and saleable steel sales to 16.95 million tonne and 16 million tonne, a rise of 1.5 per cent over FY2018-19, respectively.