Rural demand, costs help JSW Steel

Sales will rise to 1.2 million tonnes in the fourth quarter ending 31 March from 700,000 tonnes in the preceding quarter, vice-chairman Sajjan Jindal said on Tuesday in an interview in Mumbai, without giving more details on earnings. JSW’s coal costs have come down sharply, he said.

Indian demand for steel has beaten a global slump after prices at least halved since June and rural incomes grew as the government raised the price it paid farmers for wheat and cotton ahead of the general election.

The company is benefiting from demand for galvanized sheets and long products that are catering to the rural market, said Rakesh Arora, an analyst at Macquarie Group Ltd with an outperform recommendation on the stock. Coal costs have been a big concern so lower rates are very good news.

JSW Steel shares closed 0.73% down to Rs182.95 on the Mumbai stock exchange.

JSW, which had cut production in the December quarter by 20%, will run its mills at maximum capacity until at least June to meet higher rural demand, Jindal had said at an industry conference in Hyderabad on 16 March.

The company reported a loss of Rs130 crore in the December quarter and a profit of Rs413 crore in the fourth quarter ended 31 March last year.

JSW renegotiated with Rio Tinto Group and lowered coking coal rates by 43% to $175 (about Rs9,000) a tonne for the quarter. The company secured from US suppliers rates of $120 a tonne last month and is now being offered contracts at $93 a tonne, Jindal said.

Long-term prices should come down to $90-95 a tonne for demand to be sustained, he said.

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