Rising Steel Demand Adds Heft To JSPL

LARGE STEEL BALLS flanking a passageway lead to an awe-inspiring set of bronze monolithic columns that fuse into each other representing the five elements of nature — Prithvi (earth), Agni (fire), Vishnu (water), Vayu (air), and Akash (sky) — at the inner courtyard of 12 Jindal Centre, the corporate headquarters of domestic steel major, Jindal Steel and Power Ltd. (JSPL).

Naveen Jindal, non-executive chairman, JSPL, deeply reveres nature and considers Hindu epics, as the greatest books he ever came across. “The Holy texts have something to offer to everybody,” says Jindal. A health enthusiast and an avid golfer, Jindal handles corporate and political life with equal ease. He means business when donning the hat of chairman of JSPL but transforms into a ‘people’s man’ — as he puts himself — when dealing with the affairs of his Lok Sabha constituency in Kurukshetra (Haryana).

JSPL’s gross sales touched ₹57,958 crore in FY24, registering a three year CAGR of 14.8%. Profit after tax (PAT) stood at ₹5,938 crore, logging a three year CAGR of 17.8%, while return on capital employed was 13.1%. The company’s performance in the last three years had been on the back of several factors, Jindal points out. “Paying more attention to work, inspiring the team to do better have been key drivers of growth,” says Jindal, adding that deploying tools such as management enterprise systems and digitalisation, too, have contributed.

“We see two levers of profitability improvement largely intact. Firstly, product mix enrichment on capacity ramp-up of newly commissioned 6MTPA hot strip mill, and second, higher captive coal,” an ICICI Securities report reviewing JSPL’s Q1FY25 results states. The mill was commissioned in January 2024 in Angul, Odisha. High commodity prices in the super cycle post Covid led to profitability growth in steel over the past three years. The euphoria could be ebbing with recent import flux and subsequent lowering of prices. The 68% higher imports in Q1FY25 at 1.93MT over the same period in FY24 led to significant correction in steel prices. Domestic prices of hot-rolled coil have fallen to ₹51,000 a tonne against ₹76,000 in April 2022. The government is now considering increasing import duty on steel imports from the current 7% to 10-12%.

Bullish On Future Demand

Jindal expects demand to be upbeat. “As Indian steel consumption is only 100 kg per person per annum, against a global average of 225 kg, there is every possibility that per capita steel consumption could go up to 150 kgs in six to seven years,” he says. The government has set up a steel production target of 300MTPA by 2030, up from 161MTPA currently.

Jindal believes the company’s products could gain traction given the ongoing infrastructure focus of the government. “We are the only private company producing railroad rails. We make beams of large sizes, which are very important in bridge manufacturing. And we are the only ones doing that in the country. There are a lot of other speciality products, which are used in defence application and ship building etc. The overall idea is how to be more efficient, reduce our emissions, reduce cost and improve efficiency,” says Jindal.

Diversification & ESG

JSPL is also on the road to ESG transition and diversification using green hydrogen in steel manufacturing. “We aim to achieve net zero by 2047. We have already started taking steps like reducing emission using green electricity through solar and wind sources. We plan to use green hydrogen in steel making,” he says. The company has approved the largest project in the sector to produce green hydrogen for steel making. This will be used for steel production in Angul, Odisha. Jindal Renewables will develop 4,500 tonnes per annum green hydrogen generation capacity which is set to commence by December 2025. “It is in the planning stage. We made an announcement and are working on it. It will be commissioned in the next two years,” adds Jindal. It has also signed an MoU with Jindal Renewable Power to invest in green hydrogen production. JRPL will supply 3GW renewable energy to JSPL’s facilities, cutting dependence on coal by 50% in two-three years.

On diversification, Jindal believes the steel industry itself is complex. “There are so many possibilities within steel. Within industries associated with steel, diversification of products is possible. Like focusing on CO2 emissions reduction and greening our steel more and more. We remain focussed on steel mining, power generation. But we are moving more and more towards renewables,” says Jindal.

China Concern

While demand and growth trajectory look good, concerns seem to be arising out of China which is facing an economic slowdown leading to tepid demand. This has ramifications for domestic steel in the form of dumping, Jindal points out.

China with 1.2 billion tonnes accounts for 60% of the world’s steel capacity. When demand slows in China, they resort to exports. And while exporting, they resort to dumping steel. “Chinese investments are there in Indonesia, Malaysia, Vietnam, etc. We have FTAs with these countries. And they are exporting steel in India at predatory prices to the detriment of the domestic steel industry. We have written to the government to safeguard the Indian steel industry,” adds Jindal.