Need to look at extending safeguard duty, review levy: JSW Steel's Acharya

The interim safeguard duty of 12 per cent has cushioned the Indian steel industry from cheap imports, but JSW Joint Managing Director and Chief Executive Officer Jayant Acharya tells Ishita Ayan Dutt in an audio interview that tariff uncertainties are leading to trade diversions from Russia and Asean countries, and India needs to wall up to support private capex in steel industry. Edited excerpts:

 

JSW Chairman Sajjan Jindal hinted in the company’s annual report that a long-term solution is required for the industry. What would that be?

 

If you see America, they have been having duties for more than a decade - some have been there for close to two decades in a combination of anti-dumping, Section 232, countervailing duty (CVD), etc.

 

Europe put a tariff rate quota – a safeguard which kicks in beyond a particular level, and they've been tightening that quota. These have been there for six or eight years. Most countries have done longer-based duration kind of safeguards which allows the industry to have a visibility on the future. Any capacity takes four years - if we don't have visibility for at least 6-8 years, then how do we make our decisions? The safeguard duty imposed by the government has been timely and helpful. We hope they do what is required to ensure no dumping takes place.

 

The provisional safeguard is for 200 days. Are you in favour of a longer duration safeguard?

 

Yes. In Europe, it has been valid for multiple years. In addition, Europe has anti-dumping on various countries. Then they have a CVD on China. There is very high duty on products into the US. Therefore, the ability to export naturally goes down. But I am sure the government will proactively take decisions in this regard.

 

When is the final decision on safeguard expected?

 

It’s valid for 200 days. So the final duty determination will have to be done and announced within that. 

 

The industry has made representations before the government. Is it pressing for a duty higher than 12 per cent?

 

Representations are always based on what is happening today and what we have seen in the months of June and July has been concerning to us. We have seen material coming in from Russia after a long time at low prices. Some of these are coming in under advance authorisation. They have a window to export in 18 months. So, some of the steel gets circulated in the domestic market and then exported within the permissible time of 18 months. We need to proactively block this because that's a leakage. And low-priced imports from Russia indicates that the trade flows in the world are changing. That's why we feel the need to look at safeguard extension and also the percentage levied so far.

 

What do you think should be the rate of duty to be a deterrent?

 

I would not like to put a number as to what it would be and should be, but many other parts of the world have done 25 per cent. While imports have come down a bit, it has gone up 112 per cent year-on-year and 72 per cent quarter-on-quarter from the Asean in the last quarter. China is exporting into these countries. They come under pressure, and those countries are exporting back into India because we have a free trade agreement (FTA). We need to watch out for these things.

 

JSW Steel saw a sharp jump in net profit in Q1, but steel prices have softened from June. What is the outlook for Q2?

 

Q1 was disrupted by plant maintenance shutdowns at Dolvi and Bhushan Power and Steel (BPSL), which had an impact on our costs both for capex and operations. That piece will go away. We had a ₹343 crore Euro appreciation impact, which hit us on forex – that should also go. We will have an advantage in coking coal and some advantage may come in iron ore.

 

We will see an improvement from JVML (JSW Vijaynagar Metallics Limited) operations. Post-shutdowns in BPSL, the cost will become more stable. So, on the cost side, it will support the realisation drop. Markets have been softer – prices corrected in June and in the beginning of July. 

 

Margins have improved on the back of lower raw material prices. Do current margins justify your expansion plans?

 

We would like to have a slightly higher margin to be able to reinvest back into the expansions that we do. A billion dollar-plus per million tonne is getting exceeded. The specific cost of our brownfield expansion is lower and that's why we are able to do it. Otherwise a margin of what we are showing today would actually need to be bumped up to be able to reinvest back into the capacity.

 

When is the BPSL matter likely to come up for hearing in the Supreme Court?

 

We don't have a date yet. But we believe we have good grounds to discuss this review petition. The good thing is that the committee of creditors and the resolution professional have also filed separate review petitions.

 

Will all expansion in BPSL be on hold till there is some finality on the issue?

 

We have expanded up to 4.5 million tonne (mt) in the last few years from when we acquired it. We had envisaged another 0.5 mt through bottlenecking which would allow us to go to 5 mt. It was part of our plan of the 50 mt capacity target. The only thing which will be waiting is 0.5 mt till there is a decision on this asset. Beyond that, our expansion at BPSL was not envisaged in the 50 mt plan. That's why our 50 mt remains on track. We may add our Paradeep (greenfield) asset into that mix. We will see how it plays out. As of now, we will wait for the listing of the review petitions (in the SC), see the outcome, and take a view.