Before the pandemic struck, for the large part of 2019, global trade wars dampened business sentiment and overall trade slowdown characterised the global economy. The year 2020 started on an optimistic note, with the Brexit and US-China trade wars subsiding, complemented by continued policy rate easing by most central banks around the world.

JSW Steel’s response/strategic action

With appropriate and agile course-correction strategy and a prudent risk management policy in place, JSW Steel is well positioned to navigate the near-term challenges and adapt to the evolving macroeconomic scenario.

With the COVID-19 outbreak, economic activities came to a standstill from March 2020. According to the Ministry of Statistics and Programme Implementation, the country’s GDP growth decelerated to 4.2% from 6.1% in the previous year, with March-quarter growth slowing to 3.1%.

JSW Steel’s response/strategic action

We remain bullish on India’s growth story and the expansive role the country needs to play on the global front. With a conducive policy ecosystem and active government expenditure on key segments, we are confident of India remaining resilient in the near term and achieving inclusive growth, going further.

Towards the end of FY 2019-20, the pandemic restricted operations and trade of most commodities, including steel. As nearly a third of the steel produced in the world is traded, supply chain disruptions are likely to have a significant impact on the steel industry in the
near term.

World Steel Association forecasts steel demand in 2020 to contract by 6.4% to 1,654 MnT due to the pandemic. In 2021, steel demand is expected to recover to 1,717 MnT, rising 3.8% over 2020. The forecast is based on the assumption that most countries will ease lockdown measures during July; and that the major steelmaking economies will not be hit by a second wave of the pandemic.

JSW Steel’s response/strategic action

The weak global steel demand outlook is likely to have a significant impact on our export sales. However, given our leadership position in the domestic market we are favourably positioned to recalibrate our operations in line with the changing supply-demand dynamics across markets. Further, our operations in Europe and the Americas are catering to regional demand.

The overall demand was muted in the first half of the financial year, owing to the general elections and prolonged weakness in the financial services sector. The BS-VI norm directive also led automakers to shift gears to reduce their existing inventory of pre-BS-VI models, which again temporarily impacted steel demand. This, in turn, also put extreme pressure on the price, with the rates conserved under ` 40,000 (per tonne of hot rolled coil) from
July onwards.

However, towards the middle of the second half, government interventions, including public infrastructure spend and corporate tax reduction, helped revive demand. From December 2019 onwards, steel restocking commenced at the user industry level.

Following the COVID-19 outbreak and the subsequent lockdown announced by the Government of India, India’s steel companies temporarily halted their operations between March-May, 2020. Protecting the health and safety of the workforce and stringent compliance to the Government of India’s safety protocol remained a priority. Even as the industry resumed operations gradually, capacity utilisation is likely to remain low in line with muted demand in the first half of FY 2020-21.

JSW Steel’s response/strategic action

Owing to sharp decline in prices, our spreads contracted in the initial two quarters of FY 2019-20, which led us to shift our focus and direct inventory to export markets. Further, our cost-effective and efficient model enabled us to partially offset the drop in realisations and provide some cushion to margins.

Our response to COVID-19 has been captured throughout the report across relevant sections, including in strategy and ESG discussions.