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Steel companies likely to add 29 million tonnes capacity in five years

Steel companies are looking to restart expansion projects on the back of surging steel prices. In the next five years, about 29 million tonnes capacity is likely to be added, with most of it expected by FY2024.

JSW Steel is looking to add 14.8 million tonnes across Dolvi (Maharashtra), Vijaynagar (Karnataka) and at Bhushan Power & Steel facility in Jharsuguda (Odisha). Tata Steel has restarted its five million tonne expansion project at Kalinganagar (Odisha). Jindal Steel & Power (JSPL) is looking to add 6 million tonnes at Angul (Odisha).

Additionally, NMDC’s Nagarnar Steel Plant, is expected to commission its three million tonne greenfield steel plant. All put, the expansion projects add up to about 29 million tonnes.

JSW Steel’s Vijaynagar plant is at 12 million tonnes. Seshagiri Rao, joint managing and group chief financial officer, JSW Steel, said that the hot metal capacity at four units at Vijaynagar was being expanded, which will give one million tonne of extra capacity. That will happen this year.

A five million tonne expansion at Vijaynagar, approved by the board, will be commissioned in March 2024, at a capex cost of Rs 15,000 crore.

The revamp of a blast furnace at the location will add another 1.5 million tonne. “That project was put on hold because we wanted to take a shutdown after Dolvi expansion. Once Dolvi happens, it can come in,” Rao said.

The expansion at Vijayanagar will take the capacity at the location to 19.5 million tonne by 2024.

The commissioning of Dolvi expansion by 5 million tonne – which got delayed due to the second wave of Covid-19 – is expected to happen by the end of September. Also, there are plans to increase Bhushan Power & Steel’s capacity to five million tonnes from 2.7 million in three years.

The country’s other private sector steel major, Tata Steel, recently said that it had restarted its 5 million tonne expansion project at Kaliganagar (Odisha), expected to be completed in FY24.

Jindal Steel & Power, too, said that it would expand capacity from six million tonnes to 12 million tonnes at Angul (Odisha), which would take its overall steel capacity to 16 million tonnes in India. The capex is pegged at Rs 18,000 crore.

V R Sharma, managing director, JSPL said that three million tonnes expansion would be commissioned by end-2023 or 2024 and the balance three million tonne by end-2025 or 2026.

He said, steel capacity would have to be augmented for India to achieve 300 million tonnes capacity.

For the past one year, steel prices have been on an uptrend, touching record levels. Jayanta Roy, senior vice president, ICRA, said, that the upturn in the steel industry has continued unabated since the second quarter of FY 2021, leading to strong cashflows of players.

“With a better financial health, leading companies are now better placed to undertake expansion projects than they were in the past several years,” said Roy.

Major steel companies used the current cycle to deleverage and strengthen the balance sheet. Tata Steel’s net debt fell by Rs 29,390 crore to Rs 75,389 crore in FY21; JSPL saw consolidated net debt reduced by Rs 13,773 crore in FY21 and government-owned SAIL reduced gross debt by around Rs 16,150 crore to Rs 35,330 crore (provisional) as on March 2021. JSW reduced Rs 858 crore in debt after a cash-spend of Rs 15,000 crore in organic and inorganic growth last year.

Roy pointed out that in the next five years, domestic steel companies will be adding about 30 million tonne capacity, which is about 25-30 per cent of the current domestic consumption. “That should largely address any apprehension of steel shortage in India,” he added.

India’s capacity for domestic crude steel expanded from 128.27 million tonne in 2016 to 142.72 million tonne in 2020. However, Sharma said, with many small plants shut, effective capacity would be 120-125 million tonnes.
Source: Business Standard

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