JSW Steel profits fall drastically due to weak demand.

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JSW Steel has registered 56.4% fall in its Q1 of FY19-20 (April-June) consolidated net profit at Rs 1,028 crore on the back of lower sales volumes due to subdued steel demand. The company had reported profit of Rs 2,366 crore in the same period last fiscal.

Even though the company maintained its annual guidance in production, which was up three percent, its sales were down by two percent. Revenue of the company declined 3.4 percent at Rs 19,812 crore against Rs 20,519 crore.

The demand slowdown has led to higher inventory levels. While overall, the inventory was at 1.2 million tons, up 3 lakh tons from a year ago, the finished goods inventory increased to 25 days, from the otherwise 20 days.

But the company is hopeful of demand picking up in the coming quarters on the back of higher Government spending on infrastructure.

Sales improve in the first quarter: Tata Steel

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Tata Steel India said its sales in the first quarter of FY20 improved 16% to 3.87 million tonne over the previous year even as liquidity issues and rural stress that impacted domestic consumption, primarily with consolidation of Tata Steel BSL Ltd. for the full quarter.

Production went up 20 per cent to 4.37 million MT in the Q1 against 3.64 million MT with consolidation of Tata Steel BSL for the full quarter due to higher capacity utilisation at both Tata Steel standalone and Tata Steel BSL Ltd.

On the other hand, steel prices across many geographies declined in the first quarter. Input costs too have spiked with a sharp rise in iron ore prices due to supply disruptions and elevated coking coal costs. As a result, market spreads for steel producers globally have been affected.

India’s ambitions on growing steel productions.

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Reportedly, Economic Survey 2018-19 has estimated India’s steel output to hit 128.6 million tonne by 2021 and reach 140 million tonne by 2023, on the back of investments in infrastructure, construction and automobile sectors.

Press Trust of India says “With huge investments in infrastructure, construction and automobile sector, steel demand and corresponding consumption is growing at an average of 7.4 per cent. This will lead steel production to go up to 255 million tonnes by 2030 and per capita steel consumption to 160 kg.”

Crude steel production in 2018-19 stood at 106.56 million tonne, a growth of 3.3 percent over 103.13 million tonne in 2017-18. Currently, India’s per-capita consumption stands at only 69 kg, compared with the global average of 214 kg.

Tata Steel completes acquisition of Bhushan Energy Ltd.

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Tata Steel on Saturday announced it had completed the acquisition of debt-ridden Bhushan Energy Ltd.

The announcement came after the National Company Law Tribunal (NCLT) approved the resolution plan of Tata Steel to acquire Bhushan Energy for around Rs.800 crore.

Pursuant to the acquisition, the company holds 99.99% of the total equity share capital of BEL. Bhushan Energy was a subsidiary of Bhushan Steel Ltd, which was also taken over by Tata Steel last year in May, and later renamed as Tata Steel BSL Ltd.

Tata Steel had offered Rs.35,200 crore in cash to acquire Bhushan Steel, besides Rs.1,200 crore to creditors and convert the remaining debt owed to banks to equity.Incorporated in 2005, Bhushan Energy is based in Dhenkanal, Odisha.

STEEL PRICES UNDER IMMENSE PRESSURE

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Despite the mills’ best efforts, steel prices have been unable to gain much traction so far in 2019. Price increase announcements of $40/ton in January and February yielded partial and apparently temporary gains for steelmakers. The prices of all flat-rolled steel products are now well below where they were at the beginning of the year, which may be good news for fabricators and other steel users, but is not-so-good news for steel producers and distributors that have seen their margins and the value of their inventories erode.

SMU tracks steel prices each week and publishes its SMU Price Momentum Indicator, which signals whether steel prices are more likely to move up, down, or sideways in the coming 30 days. Currently, SMU’s market momentum is lower for hot-rolled and plate products and neutral for cold-rolled and galvanized.

Mill price increases cannot succeed without the cooperation of distributors. They are on the front lines in the spot market, and it’s their day-to-day decisions about whether to deal or hold the line that ultimately translate into price changes. SMU’s latest survey data suggests that support for higher prices is waning among service centers. About 90 percent of service center executives responding to SMU’s latest poll said they are having difficulty passing along higher prices to their customers.

In its twice-monthly survey, SMU asks manufacturers if they are seeing higher prices from service centers. In mid-March, around 40 percent of respondents said their service center suppliers were seeking higher prices. In the latest data, that figure had declined to 17 percent.

Medium Carbon Steel Strips.

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Spehrodization of High Carbon Steel Strips.

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Spheroidite forms when carbon steel is heated to approximately 700 °C for over 30 hours. Spheroidite can form at lower temperatures but the time needed drastically increases, as this is a diffusion-controlled process. The result is a structure of rods or spheres of cementite within primary structure (ferrite or pearlite, depending on which side of the eutectoid you are on). The purpose is to soften higher carbon steels and allow more formability. This is the softest and most ductile form of steel. The image to the right shows where spheroidizing usually occurs.

Steel prices increasing rapidly.

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Steel prices in India may go up for the third time in a month – a rare instance -as companies pass on the increase in iron ore rates.

According to sources, the third hike may take place on March 1. The increase will be of Rs 1,000 a ton, taking the total increase within a span of 30 days to Rs 2,750 a ton. The latest round will take price of hot rolled steel to Rs 44,200 a ton.

“Such an increase has rarely happened, it hasn’t taken place in the last eight years,” an industry official said.

Prices were hiked, by Rs 750 a ton, for the first time in the first week of February. The second increase, of Rs 1,000 a ton, came in the third week of the month.

The latest increase in steel prices comes after three consecutive months of softening rates in India, and the world over. Since November, prices had crashed, especially because of the China factor.

Demand in China, the world’s largest steel market, has softened since November, even though production has also been cut.

But an accident in a Brazilian iron ore mine owned by Vale SA, the world’s largest producer, pushed up prices of the raw material. According to reports, the accident in a dam will impact about 70 million tons of iron ore production.

This has led to an increase in steel prices in the global market.

JSW Steel set to acquire Bhushan Power & Steel Ltd.

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Tuesday went procedurally a step closer to acquiring an asset in bankruptcy-induced ownership change after the administrator overseeing the sale of Bhushan Power and Steel issued a letter of intent (LoI) in favour of India’s biggest maker of the alloy.

JSW Steel had made a Rs 19,650-crore offer, which included upfront payment of Rs 19,300 crore, with another Rs 350 crore earmarked for operational creditors, according to sources close to the development. After JSW Steel accepts the LoI, the resolution professional will submit JSW Steel’s plan to the National Company Law Tribunal (NCLT) for its approval.

In this resolution case, JSW Steel came from behind and bettered its initial bid to trump Tata Steel’s Rs 17,000-crore offer. The Sanjay Singal-owned company has Rs 47,000 crore of debt. While JSW had earlier acquired the one million tonne Monnet Ispat for Rs 2,875 crore jointly with Aion Investments, Bhushan Power and Steel is bigger with a 3.5 million tonne capacity. If JSW Steel is successful, this acquisition would also compensate for JSW Steel’s failed bid for Bhushan Steel Ltd. (now renamed Tata Steel BSL), which went to the Tatas for Rs 35,200 crore.

Spheroidizing of carbon steel.

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Spheroidite forms when carbon steel is heated to approximately 700 °C for over 30 hours. Spheroidite can form at lower temperatures but the time needed drastically increases, as this is a diffusion-controlled process. The result is a structure of rods or spheres of cementite within primary structure (ferrite or pearlite, depending on which side of the eutectoid you are on). The purpose is to soften higher carbon steels and allow more formability. This is the softest and most ductile form of steel. The image to the right shows where spheroidizing usually occurs.