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JSW Steel Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of JSW Steel Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashwin Bajaj, Group Head of Investor Relations. Thank you, and over to you, sir.
Thank you, operator, and a very good evening, ladies and gentlemen. This is Ashwin Bajaj, and it's my pleasure to welcome you to JSW Steel's Earnings Call for Q4 and Financial Year 2022.
We have with us today the management team represented by Mr. Seshagiri Rao, Joint MD and Group CFO; Mr. Jayant Acharya, who is now Deputy Managing Director; and Mr. Rajeev Pai, CFO. We will start with opening remarks by Mr. Rao, and then open the floor to Q&A.
With that, over to you, Mr. Rao.
Good evening. We welcome you to the briefing of FY '22 performance. In the beginning of the calendar year 2022, we expected stability and the recovery from disrupted supply chain situation caused by the COVID and other developments. This assumption was based on very strong recovery that has been seen in the year 2021. But unfortunately, the conflict between 2 large commodity exporting countries that is Russia and Ukraine, and also the slowdown in the second largest economy that is China, both together really exposed several fault lines that shook the commodity supply to the global manufacturing industry.
And it has created a; huge amount of issues, which were not anticipated. So in this situation as far as India is concerned, quarter-on-quarter, the steel consumption picked up, and we have achieved over 7% growth in India's steel consumption. In spite of all these issues which arose due to be conflict between Russia and Ukraine and slowing Chinese economy, JSW Steel has performed quite well with the highest ever volumes of production and sales.
On a standalone basis, we could achieve 5 million tonnes, 5.01 million tonnes of production, crude steel production, which is [ 13% ] growth [indiscernible] and the sales results of BPSL, 5.13 million tonnes, which is a 31% growth. We could reduce our inventory by almost 386,000 tonnes in the last quarter. If I see year as a whole, we have achieved 17.62 million tonnes of production, almost 95% of the growth, 95% of the guidance which we have given.
Similarly on sales side for FY '22, we achieved 16.35 million tonnes, again 95% of our guidance. In the last quarter, because of the drop in global steel prices, Indian steel prices also there was a volatility. Overall, we have seen in our blended realizations coming down by 3% quarter-on-quarter, but at the same time, coking coal prices surged globally, which had an impact on our costs.
So costs went up. So they went up quarter-on-quarter by 3%. So the impact of lower blended NSR and higher blended cost had an impact on the EBITDA per tonne on a stand-alone basis. It came down by INR 3,475 per tonne. It was INR 13,505 per tonne. But at the same time, as far as the domestic subsidiaries and global subsidiaries have done reasonably well. We have made an EBITDA of $39 million in our U.S. Plate and Ohio operation. We have reduced the losses in our Italian operations to EUR 1 million in the last quarter. So with this, the EBITDA on a consolidated basis, including Bhushan Power & Steel was INR 9,184 crores.
What is notable here is the despite of drop in EBITDA per tonne, the volumes which we have achieved has made us to maintain or show a 1% growth on a consolidated EBITDA to INR 9,184 crores as against INR 9,132 crores in the previous quarter. There was an exceptional item of INR 741 crores. So we have impaired our investments in West Virginia coal mines. When we acquired these coal mines in the year 2008 and '09 and thereafter, our minimum commitment in each year were agreed could not be done. So there were not enough resources in some years. There were some difficulties in some years.
So there was a dispute which was going on. We lost in arbitration due to which we had to make provision towards impairment of these investments plus a small impairment in the assets in India, in Jharkhand state where we have made some investments. So total together is INR 741 crores in the consolidated accounts where we have made the exceptional impairments here. So after adjusting the INR 741 crores, the profit after tax was INR 3,343 crores. Even the EBITDA was higher sequentially. The profit after tax came down quarter-on-quarter, majorly due to this exceptional item, which I just explained plus commissioning our capitalization of the expansion at Dolvi.
So incremental interest and depreciation has also come in, in this quarter. That's where you find profit after tax was lower compared to previous quarter. What is also important here is that our net debt was brought down to INR 56,723 crores. We repaid INR 9,589 crores in the last quarter. So debt-to-EBITDA, debt-to-equity, everything has improved quite substantially relative to the previous quarter. Debt to EBITDA was 1.46 and debt to equity is 0.86.
Our weighted average cost of debt also has come down to 5.67%. The acceptance sales on revenue account has gone up to $2.1 billion because as you are aware, the coking coal prices have gone up, so due to which even though the volume of imports have not gone up in relative terms, the acceptances have gone up on revenue account. But the capital account, we have brought down our acceptances further down, outstanding was only $27 million as on 31st March '22.
The capital expenditure program, which we had undertaken. Many of the projects got commissioned, including 5 million tonnes at Dolvi. It ramped up quite well in the last quarter. What is yet to be commissioned if we look at it, Vijaynagar 5 million tonne expansion, which is going on. Similarly coke coal plant, 3 million tonnes, where it is in advanced stage of implementation. In the downstream at Vasind, Tarapur and Kalmeshwar, except in CAL and tin line that is all commissioned.
Bhushan Power & Steel expansion to 3.5 million tonnes will get completed by September of this year and 3.5 to 5 million tonne expansion is also underway that will get completed by FY 2024. Capital expenditure in the current year will be INR 18,000 crores we'll be spending on these projects in JSW Steel, another INR 2,000 crores in Bhushan Power & Steel, so top together INR 20,000 crores. Considering the excellent performance for the year as a whole, where we have made the highest ever net profit for the year of INR 20,938 crores and an EBITDA of INR 39,007 crores, in line with the dividend policy that has already been communicated between 15% to 20% of our consolidated net profit, we will declare dividend.
So this year, the Board of Directors have recommended for the approval of the shareholders, a dividend of INR 17.35 per share of INR 1 in JSW Steel. Ispat specialty steel is acquired by the JSW Steel in the year 2018 September, along with a private equity investor. So as you have seen our track record, as and when we acquired any distressed asset in India, we park it as a separate company until turnaround is complete, then we'll bring into the parent company. So the Board of JSW specialty steel, Ispat specialty steel and also its holding company, which is called Creixent Steel, and JSW Steel Board of Directors have approved the scheme of amalgamation through merger of these 2 companies into JSW Steel. We appointed date as 1st of April 2022.
The SAP ratio has already been communicated to the market. For every 21 shares of JSW Ispat Speciality Steel, including the conversion of outstanding compulsory convertible preferred share, they will get 1 share of in the steel. It is 21:1. Similarly, the holding company when it gets merged, so every 2 shares per holding in Creixent, those shareholders will get 3 shares in JSW Steel. So these 2 together, the shares that would be issued after cancellation of the holding held by JSW Steel, will be INR 2.8 crores. So there is approximately 1.15% dilution.
The guidance for next year, that is this financial year FY '23. So 25 million tonnes of total steel production, crude steel production, which is a 16% growth over previous year. And the sales 24 million tonnes, which is a growth of 20% over the previous year. This is what we would like to achieve in this year. Then the issue, which is currently being debated is the imposition of export duty and export of steel from India. In our view, it is a very temporary measure. If we see last precedents in the year 2008, Government of India, in similar circumstances where inflation was also going up at that time, imposed export duty on steel, but it was different percentages based on grades of steel, higher the value addition, lower the export duty, 5% to 15%.
But what was important is they withdrew their export duty within a month on flat steel products and for the long products, it was there for a few months. Seeing that precedent, we expect the kind of measure which is taken to contain inflation, which is good for every one of us. Therefore, we feel it is temporary. It will get lifted soon after the things come under control. But at the same time, if I look at Indian steel demand growth in the current financial year, we expect it could be in the range of around 7.5% and base of 106 million tonnes. So there will be incremental demand of 8 million tonnes in India.
And also, there is an import of close to 5 million tonnes, imports into India is happening. Therefore, it is possible to sell in the domestic market to meet the incremental demand and also to substitute imports. These are the 2 things which we will continue to focus. And at the same time, it is our duty to service our customers with whom we have long-term relationships globally, where we have been exporting steel for over 3 decades. So we continue to do that in spite of the duty that is prevalent today.
So with these comments, I'll stop here. Any clarifications you need, we're all here to clarify. Thank you.
[Operator Instructions] The first question is from the line of Amit Dikshit from Edelweiss.
Good results in very testing time. I have 2 questions. The first one is essentially on coking coal. So what percent of coking coal cost in dollar terms in Q4 FY '22? And what do you expect it to be in the current quarter?
Last time, we told you that there will be a $50 increase in coking coal for Q3 and Q4. So it was $52. Our cost was, sale of cost was [$308].
Then we expect this quarter -- current quarter as coking coal prices really have gone to the roof globally, we expect maybe another $125 impact will come in this quarter.
Great. The second question is on your sales mix. So we saw 28% of exports in this year. Now what have you budgeted for FY '23? And what would be the likely split between semis and finished product this year in FY '22?
So we continue to budget 15% to 20% of our sales as export on an average. Depending on the market situation, it fluctuates. The last quarter, you would have seen the results. The exports are about 21%. Depending on market dynamics, we continue to be flexible to look at exports. But for the next year, I would say it to be around 15% to 20%.
And will it be more of semis because duties on semis are not there or you will continue with the same product mix?
It will be a mix of products, which we usually do, I don't think it is going to materially change the mix because today, there is a duty and tomorrow there is not.
Customers with whom we have long-term relationships because duty has come we can't say I will give semis. What he needs we have to give, we continue to service those customers, notwithstanding the duty is there.
The next question is from the line of Pinakin from JPMorgan.
Just looking at the volume guidance for FY '23, Basically, it implies versus 19.7 million tonnes of sales, around 23.3 million tonnes, around 3.5 million tonnes more. And given the export duty, if the export duty is not removed in the near term, export realizations are not remunerative, should we then expect this volume guidance to be at risk, especially given that the Indian demand growth has been lackluster so far.
So the -- if you really look at the Indian growth in the last quarter, it has been quite strong. And I think the way the projects which have been announced in the infrastructure space by the government, the announcements are very encouraging. According to us, the announcements will consume about 20 million tonnes of steel over 2.5 to 3 years. So on a ballpark basis, the infrastructure projects should add incremental volume of 7 million tonnes. So that is one lever which the domestic market will see. The second lever, as Mr. Rao was also saying is that the imports which are coming into the country in the range of 5 million tonnes is something which can be replaced through the domestic sales.
And the third lever is, as we said, we will continue to look at our export volume in a measured way by servicing customers who have been doing for years. So I think with this mix, we are reasonably confident that the measure, which it looks to be temporary to control inflation, we'll be able to sail through the guidance which we have given for the year.
Over and above I wanted to add, Pinakin, is one side, when we export, there will be lower net sales realizations because of the duty implication. Cost side also, you have to look at it. When iron ore duties were imposed on export, already NMDC reduced the price by INR 720 to INR 750 per tonne, we expect some more reductions considering international prices and also the quantum of export duty involved.
Similarly, if we look at the 2.5% duty on coking coal being not there in future, so that also will give some benefit in the cost. Even though the overall coking coal price is going up as we are guiding it to $125. If we take into account the benefit of cost that would come in, it will neutralize to some extent. The higher duties we have to pay and also the cost reduction is also to be taken into account.
Understood. And that is very detailed. Sir, just now moving on to the -- the question which is on everybody's mind on steel prices. How have steel prices in flat product in India trended in the month of May pre and post the export duty. Basically, how are prices -- how much are prices down from the peak prices that you had in the month of May. And in the near term, what kind of price decline does JSW foresee?
So if you look back, actually, internationally, the prices started softening from middle of April onwards. And we saw some kind of wait and watch in the international markets as well. So prices have corrected internationally. We see a reflection of that in the domestic market as well. And the export duty announcement in addition to that is also causing some sentimental impact as well. So we do see the prices correcting. And I think it's difficult to give a number at this stage, but we see that the numbers are falling from what we started the month. We corrected in the beginning of the month, 1st of May versus the April 1 price, we corrected our prices by about INR 2,000-plus already. We expect maybe some larger correction to come in between now and the 1st of June.
The next question is from the line of Sumangal Nevatia from Kotak Securities.
Just continuing on the pricing question. First is, is it possible to share what was the April prices versus fourth quarter? And secondly, since the duty, are we -- have we begun to pay export duty on our exports? Or is it on a prospective basis only. And lastly, what would be the difference in prices of export versus domestic prices at this moment?
So first, on the export duty, whatever vessels, which are under shipment, we would be paying the export duty and shipping it out, whatever is not customs cleared, whatever was at the port, which was custom cleared, would not need any export duty payment. Whatever we have to clear with export duty payment, we'll be doing under protest because under clause 1.05 of the foreign trade policy, in the past, precedence is there that the LCEs, which have been issued and contracts valid, those will be allowed to be exempted. So that is the assumption based on which we would be paying under protest.
As far as the pricing goes, I think, as I said, the clarification from a pricing we have given, yes April to May, as I said, INR 2,000 correction has already taken place. In long products, the correction was a little higher. And we would be adjusting the prices between now and 1st of June to reflect the correct market trend. But on an average basis, if you recall, January prices were -- December and January prices were quite low entering into quarter 4. So if you take on an average quarter 4 and if you were to compare with an average of quarter 1, I would still feel that we will be better in terms of price realizations ex-plant vis-à-vis quarter Q4, I won't give a number at this time yes.
Understood. That's very, very helpful. And sir, what would be the price difference on exports after being export duty today versus domestic realization.
Generally, if you see earlier when export prices were higher, domestic prices domestic prices have not gone up to the extent of export realizations. The point, which I would like to highlight is that domestic prices are dependent upon the landed cost of import. It doesn't depend upon export price. So today, if you look at the landed cost of imports at the prevailing global prices, the Indian steel prices are not at premium, they're almost equal. Therefore, I think that is the right comparison we have to make than looking at export realization due to implication of 15% duty.
Sir, second question is on the cost front. I mean, given the overall inflationary environment, apart from the raw material part, is there any other costs which could hit us in terms of freight, power other expenses, number one. And number two, what could be the impact of this recent approval of exports from Karnataka and also our captive mines ramping up. So if you could just share your thoughts on these 3 topics.
As you have seen that the Honorable Supreme Court has lifted the ban on export of both pellets and iron ore from Karnataka. But that is now ineffective because of this export duty, which has come in, both on pellets and iron ore. As regards to ramping up our capacity is concerned from captive iron ore sources, yes, we are ramping up further. The plan for achieving the guidance of 25 million tonnes of production, whatever iron ore that is required, 53% will be sourced from captive sources next year. So we are ramping up both in Karnataka and also in Orissa.
[Operator Instructions] The next question is from the line of Indrajit from CLSA.
I have a few questions. First, have the auto contracts for the April to September half year been finalized already? Or those are still under negotiations? And how are the prices versus the last half year that is second half of FY '22?
We have finalized -- we have finalized the auto contracts with some automakers. I think that the others are in discussion stage and would be concluded in the next few weeks.
And how are the pricing versus what we had in the last half year, like say 2H '22.
Yes. So we have concluded between INR 11,500 crore to INR 12,000 per tonne with some of the majors.
Sure. Secondly, I wanted to understand the coal sourcing, have you been sourcing anything from Russia? And what is the kind of mix? What is the kind of discount we are getting, if we are doing any coking coal sourcing from Russia?
Russia, we have been sourcing certain coals in the past as well prior to these Russia-Ukraine conflict. So we continue to do the coal sourcing, which we have been doing in the past. We haven't really gone up much beyond that as of now because changing the coal blend overnight is also difficult. The logistics challenge also in Russia because of the shipment from Baltic or from Black Sea has also become more difficult. So even if you want to do more, it may not be immediately possible.
Any price or cost advantage we are getting from the existing portion? Is there a discount between say Australia FOB versus Russia or the discount has expanded versus what it was told historically? Any color you can give over there?
Yes. Russian coals are cheaper than Australian coals today, as we see the prices have gone down, their prices into China, which you would see have been lower post the sanctions, which have been imposed on them.
Sure. Third and last question from us. Just one small clarification.
[Operator Instructions] The next question is from the line of [Alex Andres] from William Blair.
I was wondering if you can give an indication as to where are iron ore prices locally. And also when we look at steel prices locally right now, but also in general, is there a spread to China FOB prices. Can you give an indication as to where local steel prices are now in India?
So local steel prices in India, I think the current market sentiments which are prevailing, it will not be right to give that number as a local steel price today because people are on a wait-and-watch mode. I would say that the prices, which will be announced beginning of June will reflect the right numbers -- in the range of whatever is the imported landed prices today as a number, I think, is what we would be reflecting around our June price announcements. But we'll wait for a few days to let the market cool down and then announce our prices.
Okay. And for iron ore?
For iron ore, today, the NMDC has reduced the price in the last few days by INR 750 per fines. So we expect some more correction that would happen, anyhow even in the normal course, notwithstanding the current imposition of duty. Look the demand for iron ore from China is reducing. So that's the reason why the domestic prices are correcting. So we expect more correction in the prices in the days to come.
The next question is from the line of Ritesh Shah from Investec.
Two questions. So first question is in the prior quarter, we had a provisioning of INR 1,050 crores. This was pertaining to IBM notified prices. And if I remember it right, we had provision till the month of March. I just wanted to have an update on the legal side and the financial impact on the numbers for the quarter? And how do you want to look at this variable going forward? That's the first question.
As we mentioned last time, we have filed our case in the High Court of Orissa. Out of the 3 issues, which we raised, 2 in our favor and 1 we lost. What was in our favor was whether High Court of Orissa has the jurisdiction to decide, that in our favor they have the jurisdiction. The second was when the show cause was issued to JSW when we clarified by way of a letter. Before that letter even examined, they revised the price, IBM price. So natural justice was not given to us.
Therefore, our reply was examined afresh. That also has come in our favor, saying that IBM should look at that. But further IBM arbitrarily can decide the price or not without considering the bona fide sales made by the JSW Steel, that has gone against us, saying IBM has the right to decide the price. So now we have 90 days' time to go for an appeal to the Supreme Court. So, we have time up to -- up to later part of June. So we are examining to file at the Supreme Court in this regard. In the meantime, as per the accounts are concerned, the case of deciding the IBM price is in the favor of IBM, we have made provisions fully even in this quarter.
Sir, would it be possible for you to quantify it, given it will give us a better sense of actual EBITDA per tonne?
Last quarter already, we have given that number of INR 1,000 crores. So in fact, the IBM price in this quarter was higher than the previous quarter. So it is in a similar range, again, as far as the total quantum of the impact in this quarter.
Sure. Sir, my second question is for Jayant sir. You indicated INR 11,500 to INR 12,000 per tonne lower pricing for the few auto majors. I just wanted to understand the rationale behind the price decline, the underlying variables if you could provide some color over there, that would be quite useful.
No, Ritesh, sorry, if I was not clear, this is the -- we were negotiating for a price increase with the auto majors since they had a fixed contract until March. So the discussion was for the correction starting 1st April. So what we are discussing is the correction -- positive increase between 11.5% to 12%. But let me also qualify that these are few which we have done now. The others are still under discussion.
We are looking at an increase of INR 11,500 to INR 12,000. Is that right?
Yes. So there is a formula which works for the prices, how they have moved in the -- over the past period, and that gets reflected in the pricing for the next half or the next quarter.
The next question is from the line of Satyadeep Jain from Ambit Capital.
A couple of questions. Thank you for the historical context going back to 2008. If I understand correctly, at that time, after the export duty was levied, both Tata Steel and JSW, steel makers in general agreed to lower the prices by 10% or INR 4,000 per tonne at the time and agreed to keep that prices similar. And then the entire GST happened anyway, prices started collapsing. If we look at the historical context and where we are, obviously government is also looking at some kind of direction or some kind of statement of intent on lowering prices. Can the cost structure different, pointing to higher coking coal was also offset partly by lower iron ore prices. Can we -- looking at that historical context, what are the similarities and what could be somewhat different compared to what we saw in 2018? That's the first question.
As far as similarities are concerned, one major similarity is it is temporary. At the time it was withdrawn, even this time, it will be withdrawn. The number two is whether steel companies reduce the prices in the domestic market because it was -- there was a duty -- export duty. To that point, I wanted to clarify once again that the domestic prices are based on landed cost of imports. Export prices are concerned, the realizations are concerned, sometimes export prices were higher than the domestic prices, which was there for the last 2 years.
Sometimes export prices could be lower than domestic price. So this is no relationship between the two, but the demand-supply dynamics will definitely play a role as far as the domestic prices are concerned. So we have to wait and watch how it shape. 18.4 million tonnes of exports last year, which was done from India. If we just analyze how much exports can continue to be there in this year, in spite of 15% duty, that also I think is we have to wait and watch how it will shape up. But as on date, the only thing which we can clarify is that the domestic prices majorly dependent on landed cost of imports. If international prices get corrected, domestic prices also will get corrected.
Okay. Just a follow-up on that one would be if, let's say, the export duty is not lifted in the next few months. You are looking at a large CapEx in this year, at least in next year, is there a possibility of rethinking or recalibration of the CapEx just in case the market globally remains somewhat soft and export taxes are there.
So as far as the capital expenditure program is concerned, whatever we have already undertaken, where it is an advanced stage of implementation, like 5 million tonne expansion at Vijaynagar or the coke coal plants or the downstream units, these are all of the projects which we have taken up earlier and they're under implementation and orders have already been placed, and LCs are open. I don't think there is any scope for review as for these projects are concerned.
Then if the export duties continue to remain for a very, very long time, then we have to look at in future what we would like to do. And at the same time, it is definitely a loss for India to leverage the opportunity that is available right now to increase our exports from India and also to meet our domestic demand and creating capacities in India.
The next question is from the line of Vishal Chandak from Motilal Oswal Financial Services.
Sir, my question was, I mean, with regards to the export duty. Generally, what we have seen is whenever such a move is taken by the government -- there is a process of consultation either formal or informal. So was there, any kind of an indication from the government on reduction of prices or in terms of providing some sort of an incentive many of the sector for consumption over there? Or it just came in arbitrarily without any information without any consultation.
No, there is no consultation as far as industry is concerned. I don't think on export duties or import duty reductions, they will consult the industry. They will take the feedback from time to time about what is happening. The major driver for this decision is the very high inflation in India. So we all want inflation to be reduced in India. Therefore, whatever the steps that are taken, we support those steps. But in our view, it is quite temporary and transiting.
Okay. So just lastly, one more point. After the announcement of this export duty, the trade market -- in the trade market, the prices have corrected very sharply. The indication that we understand is that the correction could be in the range of INR 6,000 crores to INR 7,000 crores -- INR 6,000 to INR 7,000 per tonne, and in some cases, even higher. So in that scenario, would the prices of steel mills actually adjust to the trade levels? Or it would be still higher than the trade levels? How do you look at the scenario now?
I think, Vishal, we'll have to -- that's why I said that we'll have to wait a little bit for the market reaction to cool down because I think the right now, the numbers which are floating around in the market may not be reflective of the real price. We should allow some time for the market to settle down, understand the scenario and then take a view. So I think it would not be right to estimate the price of how much it will go down by. There will be some correction. There is no doubt about that. But the amount, I think we would like to wait for a week and just see how it goes and then announce the prices.
The next question is from the line of Vikash Singh from Phillip Capital.
Sir, I just wanted to understand as EC limits for all of the mines are much higher, but we are still guiding for 53%, 54% of the capital consumption. So just wanted to understand the -- are there any constraint or the outside prices are still [indiscernible] that we don't want to use our own resources.
Well, if you look at total production of 24 million, 25 million tonnes, the kind of iron ore requirement will be 50 million tonnes. If it is 50 million tonnes, let me say, it is 53%. That means we are using full capacity of our captive mines.
Okay. So because I saw in your presentation only from that, that the total EC limit is 45 million tonnes, all mines combined. So it is lower 25 million tonnes, you are saying now.
No. At Karnataka, we have only 7 million tonnes of captive. It doesn't make sense to bring all the iron ore that is required for Karnataka from Orissa. So therefore, Karnataka will always get iron ore from captive and also buy in the local market in Karnataka. As far as Orissa is concerned, if you look at plant wise, as I mentioned in earlier calls, if it is Dolvi, the captive is much more percentage, similarly, the Salem. Plant-wise, it is higher, but on an average basis, if you look at, the percentage is 53%.
Understood, sir. Sir, my second question that you are talking about import parity prices, but the government still have one bullet, which is 7.5% import duty. So should we taking this into account that in case if the domestic prices doesn't come down significantly, then probably that would be removed and we will be forced to sell at the parity prices, which could be 7%, 8% lower.
Even today, when we say imports into India are 5 million tonnes, 70% of this steel is at 0% duty only, that is coming from FTA countries. Even the balance 30%, if somebody analyzes, they are coming under advanced license, [indiscernible] is not there. So therefore, a significant portion of the imports today are at 0% duty. So therefore, the 7.5% duty, which we're talking about is ineffective.
The next question is from the line of Amit Murarka from Axis Capital.
First question is on the export exemption for semis. So I just wanted to understand like is this intentionally exempted? Or is it more like a temporary oversight and this could maybe kind of included into the duty structure as well soon enough. How do we think about this?
We'll check with the government, but I think the semis, if you look at world over, usually import barriers are not put. And for that matter, export barrier is reflective of that is not put. So that is the way we see it today.
Okay. Okay. Understood. And just on the auto contracts, like while I understand some of them have been concluded. But just going ahead, I was just thinking here, like given that export prices are going to be much lower or let's say, naturalization will be much lower. Could there be more aggressive bargaining by the auto guys would actually have a better bargaining power in the situation now to take, let's say, prices closer to export parity than to import parity just for the auto contract. Well, domestic, I understand prices will stay closer to import parity. So just if any thoughts over there as well.
No, I think negotiations apart, what we need to understand is that what we supply to the auto industry is basically tailor-made material in various special grades, which has made for various parts of the body. So it is not something which is overnight replaceable by them, nor it is something which I would say they can import tomorrow immediately. So the negotiation, yes, I think negotiation, the auto industry will do and continues to do.
But my sense is that their requirement is quite good because they're expectation for this year in FY '23, the commercial vehicle manufacturers have a very good view with respect to the demand this year. Similarly, passenger vehicle, in spite of the chip shortage, we see an increased requirement. So my sense is, from a demand perspective, the auto industry will require more steel this year. Negotiation is a part of the business process, so that will continue.
Sure. And lastly, could you just specify the number of iron ore revenue booked in the top line this time.
Yes, later, our investor department will provide that.
The next question is from the line of Vishnu Kumar from Spark Capital.
Just a macro question. I wanted to understand your thoughts as to obviously coking coal behaving for the rest of the year? And one more additional one would be that if Chinese cost of coking coal through Russia becomes much cheaper, do you think that their prices could see sharply lower than what it is now in the second half of this year?
So I think the divergence of coking coal prices would not continue for a very long time. You see already from a demand perspective, there is -- there are challenges as far as steel is concerned, in the international market. There is a pressure in terms of margins on every steel producer today in the world. So my sense or our sense is that the coking coal prices will undergo a correction. In the last 2 days, if you see all the prices have corrected almost by $55. So going forward, it will correct. The steel prices are correcting ahead. The coking coal prices should correct with a lag.
Sir. And secondly, on the Chinese cost structure being lower because of the cheap Russian coking coal, how do you see that playing out?
China may have a lower coking coal, let's say, cost from Russia. But I think they have different challenges within the country, which is basically inhibiting some of the manufacturing hubs there to produce. But our sense is that on the kind of impetus which the Chinese government has given off late, the intention is to revive economy. So therefore, the -- from a demand perspective situation will improve, we do not see much steel emanating out of China for exports.
The next question is from the line of Ashish Kejriwal from Centrum.
My question is on the total demand scenario, earlier we are looking at...
[Operator Instructions]
Okay. So sir, my question was on account of global demand scenario, especially when we are looking at some kind of interest rate increasing in U.S. and recession year in Europe. So are we still feeling that this could be temporary and we are in the super cycle?
So I think the super cycle concept in my view, will remain intact. One is the demand that is driven by the energy transition, even though it has taken relative back seat right now, but it remains on the top of the agenda. The second is this war between Ukraine and Russia has also triggered for many countries to increase their defense expenditure which is already quite evident as far as Europe is concerned. They declared as a part of the percentage of their GDP, they wanted to earmark more for defense expenditure, that will also trigger for more steel.
The infrastructure spending, the world as a whole, it continues to be there. So that also is a trigger of steel expenditure. Auto side, there is definitely recovery in the EV or in automotive. In India, we are clearly seeing the passenger vehicles and the medium commercial vehicles. There's a reasonably good demand triggered by infrastructure and mining sectors.
So overall, if I look at it, the steel demand will remain quite okay. In fact, we are one side talking about Chinese steel demand is falling, economy is slowing down. But just watch the numbers, what is happening in China?
Chinese steel production in November 2021 was 69 million tonnes. Look at the same number in April, it was 93 million tonnes. So the increase is 24 million tonnes. Then look at the apparent steel consumption within China in the first quarter of this calendar year, 8%, 235 million tonnes of steel consumed as against 212 million tonnes in the previous quarter. So therefore, there is an increase in demand month after month in China because of the stimulus, which is happening.
So it is not that there is no steel demand at all. There is a slight reduction in the overall steel demand in the rest of the world other than China on a month-on-month basis. That is why the production is getting adjusted in the rest of the world. The production in the month of April was 70 million tonnes in the rest of the world as against 73 million, 74 million tonnes, which you have seen in the previous months. So this clearly establishes the fact that China is recovering month after month.
So their demand will increase, thereby, the threat of exports from China is limited. In the rest of the world, either because of energy crisis, power not available or labor shortages or any other issues that are plaguing the rest of the world, the production adjustments are happening to the extent the demand is correcting. So overall, I think things will be still quite okay.
Second question is on prices. Is it possible to share our current prices versus landed cost of imports and as well as after increase in prices of auto manufacturers by around INR 11,000 to INR 12,000, is it still lower than the spot prices?
So we usually do not share our prices like that because it differs from location to location, and it will differ based on product. So as we guided, the prices are in line with imported steel numbers, and they will continue to remain in that format.
The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher.
One question on the part of exports, is it fungible for the buyers to stick to boron steel, boron-mixed steel because if I understand correctly, there is no export duty on boron-added steel?
I think -- see, the alloy steel category is what probably you're talking about. Alloy steel does not have a duty. Alloy steel will continue to be exported by people who require alloy steel in that format, whether it is boron, chromium combination or whatever they require with respect to their end use, that will continue.
Okay. Can we explore that? Or we would continue to do what we are doing for...
Our we are exporting some alloy steels, and that is there. That will continue in any case.
And I have one question on the iron ore or the mines or like say, global mines which we had. So like earlier CD mines were also there, I don't know there also we took a large write-down and let's say, Mozambique is there and this is the third one where we are again taking some hit there. So what's the thought process on the overseas operation because there were media reports as well that we are looking to divest Europe assets, [indiscernible]. So what's the thought on those like, say, overseas assets because we are doing phenomenally well and it has not been the year like over the ages, we have been doing phenomenally well in India. So why just not focusing on the India and moving on those assets where the turnaround is very difficult to get through.
No, thanks for the advice. The point remiss here is in the U.S., we have made a $200 million EBITDA from the Pipe Mill and also from Ohio together. So this year, we expect things will be better as far as the U.S. is concerned. Then in the case of Italy, you must have seen some news items. So basically, here, the orders from the Italian railways was getting delayed. It was not getting awarded quickly. So the rail mill there is purely dependent upon the orders from Italian mill, It is mutually dependent. So that train mill is dependent on Italian railways and vice versa. So therefore, in that connection, if the orders are not forthcoming, then we may have to look at it. That is a context in which that has been told. But I don't think these two operations we have immediately looking at any disinvestment immediately. But we continue to evaluate. And as you advise, we focus majorly in Indian operations and expansions in India. So whatever we have done earlier, we will try our best to turn around. If it is not okay, then we will get out of that.
The next question is from the line of Kirtan Mehta from BOB Capital Markets.
I just wanted to check on the commissioning of the second CGL line in the Vijaynagar complex as well as the color coating line. I understand that some of these lines are getting deferred. Could you explain us the issue? And when is it likely to get commissioned now?
No, both those lines are commissioned already. Vijaynagar, as I mentioned to you, excepting coke plant, coke coal plant [indiscernible] expansion, that has all got commissioned.
Right. Sir, I was a bit confused. And in terms of the JISPL, which we are integrating into the company, how would we see the capacity additions at the plant? Do we have any plan there?
After we spend approximately INR 450 crores. Today, that plant has stabilized at about 0.95 million tonnes installed capacity. So another CapEx is going on to the extent of INR 350 crores to expand the capacity to 1.2 million tonnes. This will get completed by July to September quarter of this year.
The next question is from the line of Siddharth Gadekar from Equirus.
Sir, India is a sizable player in the seaborne ore and pellet market. So with the imposition of export duties on iron ore and pellets, is it fair to assume that domestic prices can fall by almost 50%, 60% of current levels, one? And secondly, would that broadly partially offset our export duties that we would be paying on the export volumes.
No, the export of iron ore and pellets together in the last year was 25 million tonnes, 11 million tonnes of iron ore and 14 million tonnes of pellets. So this time, the export duty on pellets will have an impact in our view on the domestic prices. So whether it will come down, how much I think we need to watch. But the INR 750 reduction that has been done by NMDC is too small. We expect more correction in domestic iron ore price even in Orissa.
But sir, is it fair to assume that we could recoup the partially our export duty from the lower iron ore cost given that global iron ore prices will still stay strong because India is a sizable player?
Look, the numbers which I gave to you, it is not sizable. 25 million tonnes to the total seaborne iron ore, if you compare, is not sizable.
So given that Ukraine is also out of the market in pellet markets and Russia also there's too much uncertainty. So globally, iron ore sizes show to remain around this range. Is that a fair assumption?
As far as the overall iron ore demand supply, if somebody looks at it, even in China, we are seeing more scrap usage and the domestic iron ore production increase, both together, there could be a lower demand from China for iron ore. So taking that into account, even there is supply side, some loyal supply, I don't think there will be iron ore prices remaining at elevated levels. In my view, there will be a correction even in this because the rest of the world as I give you the production numbers are coming down.
Thank you. Ladies and gentlemen, due to time constraint, we take that as the last question. I now hand the conference over to the management for their closing comments. Over to you, sir.
Yes. What we expect in this quarter is that there will be some volatility in the overall steel prices because of global factors and also the imposition of export duty under adjustment in the local markets. But as far as JSW Steel is concerned, we continue to meet our guidance whatever we have mentioned about 25 million tonne of production and 24 million tonnes of sales volume. Then if we also see that the ramp-up at Dolvi is far and further. And there is captive power plants of 175, another 75 megawatts that are getting commissioned just now in Dolvi, that will reduce the cost further down. It is a significant reduction in the cost, which is going to happen because of this commissioning. And also the downstream has become fully operational. With all this, we'll be able to improve our product mix, we'll be able to reduce our costs, and we'll be able to increase our volumes. So with that, we feel should be okay going forward. Thank you.
Thank you. Ladies and gentlemen, on behalf of JSW Steel Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.