JSW Steel Q2 preview: Poor demand, volatile prices, oversupply set to shrink margins
JSW Steel's performance in Q2 FY26 is expected to suffer due to seasonal demand weakness, low-priced Chinese steel and margin pressure from a prolonged monsoon. Analysts predict a revenue drop of 2% and a 12% decline in Ebitda, despite volume growth.
Seasonal demand weakness, continued pressure from low-priced Chinese steel, margin pressure due a prolonged monsoon, volatile prices and an oversupplied market are likely to have hurt the performance of JSW Steel in the second quarter of fiscal year 2026 (FY26), analysts said.
The company controlled by billionaire Sajjan Jindal started FY26 on a strong note but had struck a note of caution for the second quarter for these very reasons. The company is scheduled to report its Q2 earnings on Friday.
Since the start of FY26, China’s hot rolled coil (HRC) prices have increased by about 4.5% in rupee terms, while domestic prices have fallen by about 5% even after a safeguard duty was introduced, mainly due to higher supply, according to an Elara Capital report dated 14 October. The duty imposed in April was meant to shield local producers from cheap Chinese imports.
China’s HRC prices act as a lead indicator for global steel prices and the recent divergence in Indian prices is primarily due to higher supply in the domestic market, analysts said.
JM Financials and Elara Capital said in their October notes that they expect steelmakers’ margins to shrink in Q2 on account of lower steel prices of both HRC and long steel products.
Analysts at JPMorgan expect JSW Steel’s revenue to fall by 2% sequentially to ₹42,346 crore and earnings before interest, taxes, depreciation and amortization (Ebitda) to drop 12% quarter-on-quarter even after volume growth, mainly because average selling prices weakened during the quarter.
JSW Steel’s Ebitda per tonne is expected to fall due to a mismatch between demand and production, rising iron ore costs and lower steel prices, said Parthiv Jhonsa, vice president at Anand Rathi Institutional Equities, adding that the company’s 20% exposure to long steel products will also weigh on earnings.
Analysts at JM Financials estimate Ebitda per tonne to decline by ₹1,700 per tonne to ₹8,800 per tonne.
Excess stock
Crude steel production outpaced consumption in the country in H1. Prolonged monsoon showers slowed construction and infrastructure activity, impacting demand and causing inventory to build up.
To clear stock, vendors offered discounts, leading to pressure on steel prices. And, despite safeguard duties and strict quality standards, India remains a net importer of finished steel, which has added pressure on domestic prices.
However, there have been some bright spots for JSW Steel since the June quarter. The company acquired Saffron Resources Pvt. Ltd, through which it came to own about 900 acres of land in Odisha that could be used for future expansion.
In August, the steelmaker announced a joint venture with South Korea’s POSCO Holdings to set up a 6 MTPA plant, also likely in Odisha. This JV adds to JSW’s growing portfolio of international partnerships—it already has a tie-up with JFE Steel of Japan.
Investors and analysts will watch for the capital expenditure on this project, which has not been specified. The company said earlier that it plans to spend ₹62,000 crore over the next three years, with ₹20,000 crore to be spent in FY26.
In a boost for the company, the Supreme Court approved its ₹19,700 crore plan to take over bankrupt Bhushan Power and Steel Ltd, marking the end of one of India’s longest-running insolvency battles. This removed the uncertainty among analysts over the company achieving annual capacity of 50 million tonnes per annum (mtpa) by 2030.
“With the Bhushan case over and the overall overhang behind, I’m quite confident they’ll be on track to achieve a target capacity of 50 mtpa by 2030 " said Jhonsa.
The stock has rallied 28% since the beginning of the year, significantly outperforming the Nifty’s 7% rise in the same period, a sign of sustained investor confidence in the company.
Company guidance
Analysts will also look for any revision of the company’s volume guidance for FY26 since production increased in the September quarter. Consolidated production for JSW Steel jumped 9% sequentially and 17% from a year earlier. The steelmaker’s production guidance for FY26 stands at 30.5 million tonnes while sales are projected at 29.2 million tonnes.
Commentary on steel prices and raw material guidance for the second half will also be in focus as steel prices are expected to strengthen after Diwali, said Jhonsa. This will determine the outlook for the next two quarters of the fiscal.
Analysts at JM Financials expect spreads—the difference between the selling prices of steel and their production costs—to improve in the second half of the year, supported by a rebound in China’s HRC prices during Q2, the Indian government’s move to close loopholes in safeguard duties, and the extension of import duty protection from 200 days to three years. Additionally, the second half is typically a seasonally strong period for demand.
Investors will watch for updates on expansion initiatives and their timelines. For the long term, analysts and investors expect the company’s 50 mtpa target is achievable as ongoing expansion projects at Dolvi (5 mtpa) and Vijaynagar (2 mtpa) are slated to bring capacity to 41.9 mtpa by FY28.
According to a JM Financial note dated 30 July, to strengthen raw material security, the company aims to operationalise three iron ore mines in Karnataka by 2Q of FY26, targeting production of 15 million tonnes of captive ore in FY26. In Goa, JSW plans to start mining at the Cudnem mine in 3Q, while the Surla and Codli mines are expected to commence production in the second half of FY27.
The company plans to operationalise its coking coal and iron ore mines as part of its first-phase expansion and updates on their timelines will be key for analysts.
topics
