With demand improving, can supply be far behind? India’s steel consumption rose by 8.4% in the June quarter (Q1). JSW Steel Ltd sold more in its home market, with volume sales rising by 27% over a year ago compared to 11% overall sales growth. This shift was due to trade tensions sparked by the US decision to impose import tariffs on steel. Domestic sales had outpaced exports in the March quarter also.

But imports have increased too, from countries such as China, South Korea and Japan, prompting the company to seek trade measures to limit the influx. India’s large and growing steel market will be a magnet for exporting countries.

For JSW Steel, the going has been good so far. Steel prices increased in the June quarter, blended realizations were up by 6% sequentially. Its Ebitda (earnings before interest, tax, depreciation and amortization) margin improved slightly. Sales did decline sequentially, but the June quarter is a seasonally weak one.

In FY19, steel prices may be range-bound for the next few quarters till clarity emerges on international steel trade flows. While India’s demand growth could sustain, JSW Steel’s domestic performance depends chiefly on product mix, price change and costs because its domestic capacity expansion will happen only by FY20. The company plans to merge Monnet Ispat and Energy Ltd, the distressed asset it acquired in partnership with AION. This will add to domestic volume growth.

The bigger story at JSW Steel is on the overseas acquisition front. The company’s acquisitions in the US and Europe will reflect in its performance in the coming quarters. As a result, higher output will support sales growth, but these acquisitions may affect margins till JSW Steel is able to improve their performance. The main risks are from a fall in steel prices, either due to a global slide, rising imports into India or escalation of trade tensions. The effect of financing costs on its profit is another factor to watch for.