Talking to ET Now, Naushad A Ansari , CEO, Steel Business, JSPL , says today there is enough competition within Indian steel industry and if you look at the demand-supply ratio, they are all competing with each other and by and large, the impact of the external price is limited to the export.
Edited excerpts:
There is a new steel supply discipline emanating from China, one that is finally plugging over the supply problem. Do you believe that it is a sustainable discipline?
If we look at China's domestic prices today, they are generally higher compared to what is available at other places in the world. What we believe is that this is the current Chinese scenario which means now it is depicting or showing what is actual cost that is being incurred by Chinese steel plants. If this trend continues, that means their true cost is really determining the export for them, then we have absolutely no issue because we can compete very well with that.
In other words, if there is a level playing field in which China's true cost is reflected in their exports, then we have really no issue at all and we do believe that since the Chinese government is also pushing them very hard to reduce the environmental issues and so on, the same status is going to remain for a much longer period. Right now, we are not really very concerned about the Chinese steel being dumped in India.
Let us do a bit of a trend spotting as far as the steel prices are concerned. How do the global steel prices affect local steel spreads and what is the lag if any and how have your own steel spreads improved over time?
The global business is all interconnected and steel is no different. Therefore, the external prices certainly will have impact on the domestic price. The important thing is in India, we have certain advantages which you need to remember. The advantage is that we have iron ore available in India. Of course, most plants have to import the coking coal and so on and also gas is not available. So, to that extent, our competitiveness depends primarily on the energy cost and of course the raw material cost. The big advantage which we have in India is that our labour is still more efficient in terms of let us say their cost per tonne of production and therefore we can actually compete very well with most other countries.
Of course, it is very important to have something like minimum import price which the Government of India has already done because that prevents any unfair dumping to the country. Therefore, today there is enough competition within Indian steel industry and if you look at the demand-supply ratio, they are all competing with each other and by and large, the impact of the external price is limited more to the export which we are doing.
Obviously as a country and as a company we are also doing a substantial portion of export. Therefore, our cost structure needs to be such that we remain competitive both in domestic as well as in the external world. This lag really depends on which product we are talking about and what is the kind of delivery scenario.
For example in steel product, the lag is not very large. It is something which is let us say three-four weeks' lag which is available between external world and our own world.
We are getting you on a day when your stock price is up by nearly 9% in trade, a big thumbs up coming in from the markets to your fund raising plans with reports suggesting you could raise about Rs 1000 crore via the QIP the company is looking to list the business it has in Oman. Tell us a bit more about your fund raising plans. That is what the markets really want to know.
You have already heard our chairman Mr Naveen Jindal talking about it a couple of days back. We are talking about raising a Rs 1000 crore through the QIP. That process is already on.
In a month or two, we should be able to complete that process and Oman process in terms of going to public has already started. We are starting this with some of the very well-known organisations in UAE as well as in Oman. That process itself will take some time. It might take four to six months before we actually go to the public and we are very hopeful that we can get some very good results out there simply because the Oman unit is doing wonderfully well.
You have a large fund raising plan which the chairman Naveen Jindal has been talking about. While we await that fund raising plan as well as the conclusion of the deal with JSW, the fact is that JSPL had four years of losses and several efforts were made by JSPL to go into the green. Now that there is a positive environment with respect to the prices that we are seeing in the commodity markets, can we expect JSPL post the fund raising or even with just what is happening with commodity markets, to churn in a profit in the new financial year?
Yes, it is something on which we are very much on the track. Our Angul plant BOF has started last month and it is in the process of being actually commissioned. This quarter itself, we will start getting very positive impact of the Angul plant operation and we are extremely hopeful that in 2019 we should be absolutely on the plus side.
We are very, very hopeful that we should be able to do that. Obviously, we do expect that the market conditions will remain by and large similar to what it is and so on and based on that we are almost sure that we will be in the positive.
Let us just talk a bit about the pricing because reports suggest that you have passed on the high iron ore costs to your consumers. What is the price hike that you have taken and what has been the average jump in realisations?
Please understand it is not just the iron ore but also the coking coal prices have gone up very substantially, the refractory cost, the electrode cost etc. There are many items where the costs have gone up substantially and obviously steel plants are in no position to absorb that.
Everybody is trying to improve their efficiencies and trying to find whatever maximum they can do but certainly a substantial portion of this will have to be passed to the consumers. We expect that the prices compared to last four-five weeks back will certainly be up by Rs 3000 to Rs 4000 per tonne.
About the local demand, the government expects 8% demand CAGR over the next 15 years with the national steel policy in place. Do you believe that this is a feasible growth figure and that you will be able to achieve it?
I would say it is an aggressive number but I still feel that is quite possible because government is taking number of steps in order to promote steel usage and also a number of infrastructure schemes are coming up. If we continue in the same way, then it should certainly be possible.
Fifteen years is a long time. I cannot really comment on 15 years but certainly in the coming year or two, I am very hopeful that the same trend would continue and hopefully we should be able to achieve the kind of number which the government is talking about.
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