In line with the global steel producers like Arcelor Mittal and Corus, JSW Steel has also announced the production cut by 20% from November 2008. This will translate into the production cut of around 0.4mn tonnes for FY2009.
This is due to the inventory built up currently at the company’s plants led by a weak demand for steel globally and domestically.
Also, JSW intends to use this time for maintenance. JSW Steel has delivered a 5% y-o-y growth in the crude steel output to 0.338 million tonnes for October.
The company had also cut HR Coil prices by Rs5,500/tonne early this month. We believe that the production cut and the weak prices going forward would drag the profitability of the company. Hence, we downgrade the stock to NEUTRAL.