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JSW Steel Ltd’s reported crude steel production numbers for the month of November marked a growth of 10% year-on-year. The company’s flat steel production was up 4% year-on-year while long products saw a strong 13% growth. These numbers exclude trial production from Phase II expansion of Dolvi works for part of the month of November’21. Including the same, the growth would have been much stronger.

It is the expansions that are likely to drive growth for the company as we move forward. The integrated operations of the Dolvi 5 million tonnes per annum (mtpa) brownfield expansion had already commenced. The same has taken the company's capacity to 23 mtpa. The JSW Group capacities in India & USA (including capacities under joint control) have grown to 28 MTPA. Meanwhile, the ongoing expansions will aid growth for the company further. The company’s 5 mtpa brownfield expansion at Vijayanagar is progressing well, with civil works underway at the site. The Downstream expansion projects at Vijayanagar, Vasind and Tarapur are in advanced stages of implementation. Overall, the same will add 7.5mtpa to the company's capacities by FY24.

The demand environment that remains slightly sluggish currently, is expected to catch pace in the fourth quarter. The Indian Steel Association (ISA) expects Indian steel demand to grow by about 6.7 % during 2022. This should help support volumes and realisations too. The steel realisations after improving regularly for more than a year, however, had seen some correction too during the ongoing quarter. 

As per Nomura Research, the JSW steel had cut HRC (hot-rolled coil) and CRC (cold-rolled coil) prices by 2,500/tonne to 68,000/tonne and 75,000/tonne, respectively, for early December-21 deliveries. The channel inventory level had remained relatively elevated and weak demand led the company to cut prices. The price correction recently has also led to concerns on margins. 

However, on the positive side, the raw material prices too are cooling down. The moderation in input costs should be supported by the country’s largest iron-ore producers NMDC Ltd cutting iron-ore lumps and fines prices by 870/tonne and Rs200/tonne, respectively, for December’21. 

The international coking coal prices that had seen sharp surge are also slowly moderating and were down 9% month-on-month to $385/tonne for November-21 as per Nomura Research data dated 3rd December, which also suggested that current price were further lower at $316/tonne, owing to falls in the last two weeks.

The moderating input costs, rising volumes should aid earnings as a weak demand environment leads to some correction in realisations. say, analysts. The stock prices that have corrected more than 10% since August are factoring large part of concerns on tepid demand and steel price corrections during Q3.

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