JSW Steel profits fall drastically due to weak demand.

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

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.

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.