Steel Authority of India Ltd
NSE:SAIL
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Steel Authority of India Ltd
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Ladies and gentlemen, good day, and welcome to the Steel Authority of India Q3 FY '23 Earnings Conference Call hosted by Nuvama Institutional Equities. [Operator Instructions] I now hand the conference over to Mr. Ashish Kejriwal from Nuvama Institutional Equities. Thank you, and over to you, sir.
Thanks, Aman. Good afternoon, everyone. On behalf of Nuvama Institutional Equities, we would like to thank the management of Steel Authority of India to give us an opportunity to host this call. Today, we are happy to host Mr. Anil Tulsiani, Director of Finance, along with his team.
Now I will request the management for his opening remarks and thereafter, we'll open the floor for Q&A. Over to you, sir.
Thanks, Ashish. This is Anil Tulsiani, Director of Finance, SAIL. Good afternoon, everyone. I welcome you all to the investor con-call on the financial results for Q3 and 9 months financial year '23 update.
Financial year so far has been quite volatile with sudden surprises, by the first quarter saw the coal prices at the peak. The second quarter witnessed a sharp decline in steel prices on global cues. The demand has been steady in India and has resulted in the prices again showing a rising trend. And aided by the reduction in the coking coal prices, this helped the indigenous producers to stem back this [indiscernible].
Before I brief you on the performance of the company in Q3, let me take you through the macroeconomic scenario, which influences the steel industry in a big way. Therefore, as mentioned by Ashish, we will take up your queries thereafter.
Starting with the world economy. The industries across the globe seem to have adjusted quite well to the new norm, leaving behind the effects of COVID-19. The inflationary forces, which affected the major part of the year, now has been slowly pointing to recession maybe in the near future.
The slowdown in China due to the lockdown from their zero-tolerance policy also affected the scenario and making the matters worse, has been the fluid geopolitical situation from the prolonged Russia-Ukraine conflict. The measures taken by the economics don't necessarily are leading to slowdown in growth.
Despite these headwinds, real GDP was surprisingly strong in the third quarter of '22 in numerous economies, including the United States, the euro areas and the major emerging market and developing economies as reported by IMF in its World Economic Outlook published last month.
Another silver lining in the offering has been the recent uptick in the economic activity in China as they come out of the lockdown. This has resulted in the financial agencies meet upbeat about improved scenario in the near future. IMF in its joint World Economic Outlook has raised the projection for global GDP to 2.9% for calendar year '23 from the earlier 2.7%. The rate is expected to further improve to 3.1% in 2024. The major advanced economies, which includes countries like U.S., Germany, Japan, UK, France, et cetera, have seen much lower increase in GDP growth projection for 2023, with U.K. actually projected to contract by 0.6%.
The emerging economies are expected to fare much better than the advanced counterparts. World Bank, however, is less upbeat on the global GDP growth, cutting it down to 1.7% for 2023 as the impact of Central Bank rate hikes intensified, Russia's war on Ukraine continues and the world's major economy slowdown.
Now coming to the Indian economy. The Indian economy ever stands out as a silver lining with strong demand and consumption but...
Amongst the major economies, we are placed much better and beating the growth projection even over China. India is expected to grow in the range of 6% to 7% over the next year in various reports like IMF, World Economic Order, World Bank projections Monetary Policy Committee of RBI, et cetera.
As per IMF, growth in India is expected to moderate in calendar year 2023 to 6.1% from 6.8% estimated for 2022, reflecting the less favorable outlook and tighter financial conditions before climbing again higher to 6.8% in 2024.
Uncertainty around the outlook, though remains high with risk tilted to the downside. A sharp global growth slowdown in the near term would affect India through trade and financial channels. Intensifying spillover from the war in Ukraine can cause disruptions in the global food and energy markets with significant impact on India.
The domestic industry will also have to guard themselves from the imports. The global steel industry, which was seeing a decline in demand and corresponding realizations for past few months, seems to have woken up to a new beginning in the new year with prices in January exhibiting an improvement. With China also crawling back to life, there are expectations and hopes of the international demand picking up, not only for steel, but also the raw materials that go into making it.
However, in the wake of environment concerns, it remains to be seen how far the Chinese government will be allowing its producers to increase their production. Meanwhile, with China again starting to procure coal from Australia after a gap of nearly 3 years, there are concerns on coking coal prices pushing higher. The prices for hard coking coal sourced from the world's biggest suppliers, who are already operating in the range of $360 to $370 per tonne.
For steel industry, the price of this fuel, fossil fuel dictates the cost of production for major producers using [indiscernible] routes to a large extent. Now coming to the Indian steel industry, the impact of improvement in global markets has poured over to the Indian markets as well. The price of steel has seen an improvement during the past few weeks for both flat and long segment.
The demand projections for steel in India, however, remains upbeat with the crude steel production in the country recording a growth of around 5% during April to December financial year '23 over CPLY. Meanwhile, the consumption of steel has also grown by around 12% in the country during this period.
As per the World Steel Association, Short Range Outlook has projected growth of 6.1% and 6.7% in calendar years 2022 and 2023 respectively. Now coming to the performance of the company, the company has recorded its best-ever 9-month production performance during April to December financial year '23 for all the segments like hot metal, crude steel as well as saleable steel. The crude steel production during the 9-month period stood at 13.337 million tonnes as against 12.770 million tonnes during the CPLY. This is a growth of around 4%.
At the same time, the saleable steel production has grown to 12.547 million tonnes during 9-period financial year '23, vis-a-vis 12.454 million tonnes during CPLY. The sales volume during the period has also been the highest ever 9-month performance, growing to 11.516 million tonnes from 11.447 million tonnes.
The sales in the domestic market has grown from 10.314 million tonnes to 11.213 million tonnes, a growth of nearly 9%. During the period, however, exports have been lower by around [ 8.3 lakh ] tonnes.
Now coming to the financial performance. The financial performance during the 9-month financial year has seen a growth in top line, whereas the profitability has taken a hit in line with the industry sales. The average realization during 9 months remained higher than the CPLY period, coupled with higher sales volume. This has helped in revenue from operations growing to INR 75,317 crores for the 9-month period financial year '23 from INR 72,715 crores during CPLY, a growth of 3.6%.
EBITDA, PBT and PAT during the 9 months financial year trend fits to the INR 5,978 crores, INR 1,157 crores and INR 854 crores, respectively. During quarter 3 financial year '23, the steel prices have reduced significantly, led by -- which has led to the revenue from operations showing negative growth over CPLY as well as previous quarter.
With the cost coming down in quarter 3, the company has posted a positive PBT and PAT of INR 635 crores and INR 464 crores, respectively, vis-a-vis, a loss in the previous quarter. Meanwhile, EBITDA has increased by more than 87% over Q2.
The increase in coking coal prices again is threatening to increase our cost of production in the current quarter. However, the simultaneous improvement in the steel prices is expected to cover up the same.
With these words, I hand it back to Mr. Kejriwal for opening the question-and-answer session. I'm sure you have a lot of queries on the performance. Thank you.
We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Amit Dixit from ICICI Securities.
Congratulations for good performance. I have two questions. The first one is on essentially the rail price revision that we have been -- that impact we saw in Q1, we saw in Q3 also. How much quantum of this is left actually for FY '22, FY '20, FY '21, if you can mention it? That is the first question.
Okay. The rail price revision, we have got it until 2021. We have already submitted our rail price to the CA cost optimization for '21, '22. And it's expected that we will get the benefit of this in this financial year itself. So it will be for around about 1.1 million tonnes, there will be a revision in price.
Is it possible to quantify at this stage?
It may not be -- we may not be able to quantify it because it entirely depends on the way the CA cost calculates it, but we should get a good amount.
Great. The second question is essentially on wagon wheel capacity that we have. Now we have been hearing that government is focusing on this. There is a plan to set up another factory. So just wanted to understand the current utilization of this wagon wheel capacity that we have and whether we would be participating in some sort of investment in that new facility.
Yes. Actually, we have also participated in the tender, which has been floated by the government -- by the railways for this. And at present, our wheel capacity -- we are able to supply wheels to the extent of 40,000 wheels per year. But this year we are planning to increase it in the next year with some modifications in the plant also.
The next question is from the line of Pinakin Parekh from JPMorgan.
My first question is, if we look at the crude steel production, 4.7 million tonnes is what we did in this quarter, which is higher if you compare to the last few quarters. But what is the maximum that we can do at this point of time if demand were to be very strong, given what your -- all the expansions that the company did. And what will it translate into saleable steel volumes on an annualized basis, if everything was maxed out at full utilization?
Yes. Actually, this time -- whatever we have done is more or less at our capacity. Our capacity is about [ 19 ] million tonnes of crude steel. So if you take a proportionate of that, so we are working at 100% capacity, but we can check out our assets more and get a better quantity maybe in this quarter.
We are already -- January was one of the best months ever for SAIL, and we expect the trend will continue in the remaining 2 months. So we feel that we should be doing more than 4.7 million tonnes of crude steel in the last quarter.
Understood. So to that extent, while there is some scope for higher volumes, not beyond much unless we see a new round of capacity expansion at the crude steel level. My second question, sir, is on the balance sheet and the borrowings. What is the outlook for borrowings and debt for some FY '23 and FY '24, given where the profitability and the CapEx commitments are?
Yes, we have CapEx commitments around about will be spending around about INR 5,500 crores. We have already spent around INR 3,500 crores already. And we expect to end the year with a CapEx from the INR 5,500 crores. And slightly more than that, you can say around about INR 6,500 crores to INR 7,000 crores in the coming financial year.
And regarding the borrowings. Yes, there was an increase in borrowings as compared to the beginning of the financial year. But now we have spent it and we had a reduction of borrowings even in the month of January, and its round about 28,000-odd levels. And we expect it to come down by another INR 3,000 cores to INR 4,000 crores by the end of this financial year.
So 28 and another 3 to 4. So we are talking about 4 -- INR 25,000 crores borrowing number.
INR 24,000 crores, INR 25,000 crores yes. It should be until and unless there are some surprises somewhere. And otherwise, we should have a borrowings of...
The next question is from the line of Sumangal Nevatia from Kotak Securities.
So just continuing on the previous question, what is the net debt as on 31st March -- 31st December, sorry.
INR 29,270 crores.
Sorry, INR 29,270 crores?
Yes.
Okay. And sir, what is the like I mean, the reason behind the very sharp increase over the last 9 months, is it unwinding of working capital?
Basically, what was happening was that we had the coal prices are increased. So because of that plus besides that the CapEx also was quite high. So these are the major factors which have actually led to the increase in the borrowings. And quarter-wise, if you see in the first quarter, the borrowings were to the tune of 9,000 higher and which have now come down by -- to round about INR 2,000 crores in this particular quarter.
Okay. And sir, given that coal prices again are back to, I mean, almost approaching $400, do we expect a further build up on the working capital side and the increase in borrowing?
Yes, actually, the prices of coal, which has gone up. Luckily, along with that, so there has been some increase in the price of steel also. So it is going to offset more or less neutralize the effect of the increase in coal price.
Okay. But sir, neutralizing maybe on margins. But at least on the working capital side, it should increase, right?
We will try to -- because our collections will also be going up because of this. And we are trying to also reduce our receivables by something like INR 1,500 crores to INR 2,000 crores in the remaining 2 months. So this will surely help us in reducing our [indiscernible] .
Understood. Sir, my second question is with respect to our growth plans in the medium term. In between, we had articulated a plan to add almost 10 million to 15 million tonne capacity. Now if you see we are approaching our rated capacity as far as volumes are concerned and we have not yet started any growth expansion. So from a next 3- to 4-year point of view, I mean, what sort of volume or capacity addition are we looking at?
We have already formed up some sort of plan for expansion. But there are two things that we are doing. One, whatever assets which we have now, we are trying to check them out. It means whatever is there doing some debottlenecking schemes and all that. With that, we will try to probably increase the capacity by another 3 million tonnes in the coming 3 to 4 years. .
And in the meantime, we will be going in for our expansion plans. And most probably, we will be initially starting with the modernization, it's a new expansion at our IISCO steel plant, which will be the first one, where we are planning to increase the capacity by 4.5 million tonnes. And then staggering the other expansions also, which will take place subsequently to probably we are going for a 12 million to 13 million tonne expansion by 2030, '31.
Okay. And this 4.5 million tonnes, when should we expect the CapEx to start because FY '24, your guide -- yes.
CapEx should start from the year '24, '25 because we'll have to firstly finalize the DPR and then going for the tendering process. So the entire process should take almost 1.5 to 2 years.
Okay. Got it. And just one last question. If you could just guide on the NSR realization and coal cost movement, which we are expecting in the fourth quarter versus third quarter?
For fourth quarter, So far, so good. Like we've got some improvements in NSR in the month of January. But February now, there are again some tremors which are coming up, like there have been some stabilization and maybe some cooling off of the NSR. March, we cannot predict anything now. It's too early to predict for the March.
And sir, coal cost? .
Coal cost, it shares. For January and February, the coal cost, whatever we will be having, will be more or less in line with the December cost, maybe INR 1,000 or INR 2,000, INR 1,000 or INR 1,500 extra. But March, we then have an increase of around over INR 4,000 in the cost of coal.
The next question is from the line of [ Aakash Goel ] from Tara Capital Partners.
I just want to get an idea on the employee costs. Because when I'm looking at it, I see there has been a significant reduction from both on a Y-o-Y basis and on a quarterly basis. So if you could give you some insights on what was the reason for the coal cost reduction as such.
Yes. Employee cost has been gradually reducing. That is basically because we are -- because the senior level people who are in the age category of 60, around 3,000 have left the company now. And the recruitment has not been that much. It has been very less. We are not -- we are trying to reduce the recruitment to the extent possible.
So there is a gradual decrease of round about you can say in a quarter round about INR 50 crores to INR 100 crores, reduction is there in every quarter. I think probably this trend should continue on for the future also because retirements are there in the near future also of, you can say, in a year of almost 3,000 to 3,500 people will be retiring. So that benefit will get in the employee costs coming down.
So going forward, we can expect the trend to continue?
Sure. It will continue. Because whatever recruitment we will be doing also, that we are the lowest of the scale. So I mean at the lowest of the grade. So their salary is quite low as compared to the people who are retiring now.
The next question is from the line of Rahul Jain from Systematix.
Yes. Sir, then on the debt question. So if you see on March, we were at about some INR 13,000-odd crores, and we have reached this massive number of INR 29,000 crores. I'm wondering what gives you the confidence to go ahead for this another big round of CapEx.
So earlier because I remember 10 years ago, when we started this CapEx round, we were net cash. We have INR 10,000 crores cash. And after that, we pursued this massive expansion and where we are today at whatever 20 million tonne production. So I'm just wondering what is behind this kind of confidence despite sitting on that number to go ahead with this CapEx?
Basically, the past gives us the confidence of the future. As on June 20, we had a total borrowing of nearly INR 52,000 crores, which you can say in a matter of, you can say less than 2 years, we could bring it down to around INR 30,386 crores.
And now yes, it has inched up, it has gone up basically because of the coal prices being extremely high and but -- and the steel prices not been commensurate to that. But I think the industry is not going to last just with very high coal prices and low NSR. So they'll come -- the time more or less comes where it is stabilized. The coal prices are also at a level where we can sustain our steel production. And with higher volumes coming up, so the benefits of higher volumes and lower fixed costs will surely help us. So we are very optimistic by this year-end, though we had at one point of time nearly at least more than INR 29,000 crores. But by this year, we should be at around about INR 25,000 crores level.
Right, right. And secondly, on the -- we had a huge revaluation, which we have done for iron ore and [indiscernible] plans of selling good quantity of iron ore. Any major progress over there in the [indiscernible] and Jharkhand did not get approvals and things like that?
There is not much of a progress during the financial year. Basically because the price which we expect from that until and unless you don't get a good price, we are not going to sell it. Because it's an asset for us. So if you get a good price for it, we are probably going to sell it.
And there is something like in the case of -- we have got a major resource act in Jharkhand mine. So we are awaiting clearances from the Jharkhand State Government. So once we get the clearances from Jharkhand State government, the sale of mines from there will go up.
Right. And then sir, lastly is on this on this revaluation exercise that we have every year. So do you think this is going to be a feature which is going to remain with us? Or are we working to have a more streamline method that we have a correct accounting picture, right? Because from railways, like you said, you are going to get money from 2022, right? And from this year -- you will get probably next year. And what I can understand the adjustment would be at least more than INR 5,000 a tonne, right? So it can be really -- has a lot of much an mismatch in your account reporting.
Are you talking about the mines part of it?
No, no. I'm talking about the railways sale. 1 million tonne sale which we're having. So there is a huge timing difference, right? I mean last year's sales difference you will get this year, right?
Yes. Actually, what has happened is that the cost of -- input costs have gone up tremendously. So what happened was railways also realized that there was a point at one point of time where the cost was high. And even the NSR cost structure, it was higher than that of the rail products.
So then the railways immediately realized this, and they give us a INR 5,000 hike in our -- in the price for the rails okay. But that is also not substantial for the cost, which we -- which are there for '21,'22 and now on '22, '23 also. So we have already given our pricing for coal to the CA cost and they're evaluating it. So we will -- we should get a benefit on that account.
But how much benefit have we been asking? And what...
We cannot disclose that at this point of time because -- yes. .
And when you will submit the...
First, it will be made public.
And when will you submit the revision for this year, that is FY '23?
FY '23 will be done only after the AGM. They actually normally take the annual report. And based on that only, they do the working there. So it will probably you can say in the month of September, October, then we'll have to submit for financial year '23.
So the ad hoc payments are made based on the pricing which was prevailing in FY '22. Is that the right way to look at it?
Yes, yes. That's right. And now what is happening is if FY '22 gets revised, then -- and it goes on a higher side, then they'll probably revise the ad hoc price for '23 also.
The next question is from the line of Ritesh Shah from Investec.
Two questions. One is I just wanted to understand how much is our total iron ore production. Out of that, how much comes from Orissa? And specifically, with respect to the Orissa iron ore, how should one understand the royalty aspect? The reason I ask is we understand that the Orissa state government has been very aggressive in giving out demand notices pertaining to the revised IBM-notified rates. So is there any impact that we have over here? .
The iron ore prices, basically, it is guided by the IBM rates for royalty, okay? Now what has happened is this time on the contrary, I would just like to tell you that the Orissa government earlier, they were charging us the royalty on fine at the highest rate for lumps. Okay.
But they -- in this particular financial year, they have changed it for the royalty being -- the charge to us is the highest rate for fine instead of royalty for lumps. So that has given us some benefits in this particular financial year. It's not basically a benefit.
What they should have done it years ago, they have done it correctly for this financial year. Otherwise the rates of royalty in Orissa are basically the IBM rate, so we don't have much of a thing in that. I don't think the Orissa government has brought anything in the -- any role to play in this.
And sir, what percentage of our production comes from Orissa?
I'll just give you the figure.
Right and sir, my second question was...
Can I give it you offline.
Yes, sir. That should be fine. And sir, my second question was, if you could please help us with what is the current prebilling rate for long product prices and flat product prices? And the average for the quarter gone past.
For January, the long product prices was lowering in the range of, you can say, INR 56,000. And the flat product prices are in the range of INR 54,000. And when we come to the previous quarter, the long product prices were in the range of INR 54,500. And so are the flat products are down but between INR 54,000 to INR 54,500.
Sir, just one question. Sir, you indicated that the coking coal prices are going up very sharply what we see for the month of March. Sir, are we confident of increasing the steel prices in a similar range? Are we confident of demand and our ability to increase the steel prices?
That is purely on demand and supply, demand and supply. We cannot decide, the market only basically decides. But yes, there's just one thing which we should always bear in mind, that this increase in coal prices is basically for the entire industry. It doesn't impact only sale. So the industry will surely try to push up the prices.
The next question is from the line of Prashant Kumar Kota from Emkay Global.
Also guiding us on the net debt part that we are almost peaking over here and things like that. Sir, you alluded to this point on coking coal. So we see next year, we may be buying about 15 million tonnes or 14 million tonnes of coking coal. And at the current price close to $400, thus SAIL will be spending $5 billion to $6 billion. India as a whole will be spending $20 billion, $25 billion. And it's I think probably the second largest import item for a country now that we are the world's largest coking coal importer...
And sir the thing is something does not seem right over here. After doing everything correct, not just SAIL, all the Indian [indiscernible] as a whole, still we are at some optimal profitability just because of one reason, one external force. Then there is something that is not right. Probably there's also the various management have indicated that the Platts index, which is the reference index, has to be more transparent, et cetera. Those things are there.
So what should we be doing so that we move to something like a more -- and India as a country, more negotiated fields. For example, the thermal coal, Japan used to set the price and with the large miners and the smaller miners a benchmark, they grade with this negotiated prices and for the quarter or for a month these prices prevail. That's a function of what benefit we are buying coal to produce is doing business. This is completely isolated -- it is ultimately isolation is there. And the one -- also our observation is ore prices if go up, the impact on steel is 1:1 but in the case of coking coal the various parts of the world has different source, different mix, different [indiscernible], domestic purposes gas-based steel, et cetera.
1:1, [indiscernible] is more than other and the pricing is global image. So what is the long term solution apart from India developing its own resources, it will take 5 to 10 years, maybe -- but apart from that what can we do on the negotiations as a country, but can we take out the help of our leadership -- Indian leadership. How do we go?
I'll just tell you one thing. Actually, the Indian Steel Association is basically looking into these aspects, wherever high coal prices is concerned or wherever these import of steel is concerned. We are basically looking at it and where all of us are involved, SAIL, Tata Steel and all. So this is there.
And besides that, there's just one thing that we are -- it's just that the indexes like that. But we are getting some discounts on that when we are purchasing from the parties. And we also have our own -- SAIL has got -- company of joint venture in the name of ICVL, which has got its own mines at Mozambique.
So though the coal quality is slightly not as good as Australian or U.S. coal, but then we are getting it at a comparatively lower price. And we have also [indiscernible] into Russian coal also, where also we are getting quite a lot of discount. So I think the more we find avenues to -- with other suppliers of coal. This will put pressures on the regular suppliers and who are playing a part in the Platts Index and all. With Platts Index, it will put pressure on them to also bring down the prices to some extent.
Yes, at this moment, a price of $380 is hovering at this point of time. It is really very difficult to absorb it. But I think this industry has seen a time when we were having -- the index of more than $650 also. So we are just keeping our fingers crossed that the sudden hike, which has started taking place from middle of January 15, I think, should now start showing a downward trend.
The next question is from the line of Siddharth Gadekar from Equirus.
Sir, just one question in terms of volumes. Like we have almost have, I think, the 1.6 million to 1.7 million tonnes of inventory. So in terms of our 4Q guidance, what kind of sales volume can we expect in 4Q?
The inventory is actually 1.2 million tonnes. And if you see at the beginning of the year, we had round about 6 lakh tonnes of inventory. So our targets are to bring it down maybe to less than 1 million tonne in this financial year.
So what sales volume can we expect in the fourth quarter for the current run rate that we are looking at?
4.8, around 4.8.
The next question is from the line of [indiscernible] from [ Avendus Park ]
A couple of clarifications. One on the coking coal. As you did mention from December levels, there is INR 1,000 per tonne increase. Can you just help us with what is the carrying cost last quarter for coking coal?
Last quarter, it was in the range of round about INR 25,500 per tonne, the imported coal.
Got it. The second one, the debt number that you referred to a INR 4,000 crores reduction. That is by which financial year?
This is by the end of this financial year.
FY '22. One question on the industry trends. You did say that in February, you were seeing a bit of softening in NSR. How do you see domestic demand? That's one.
And second, given that international prices have gone up for the industry. Is exports becoming a viable option now? And also, we are seeing that rebar is at a premium to HRC. I mean what is the driver there?
Actually, there is a very good demand for steel in India. There is absolutely -- which whatever we are producing, we are able to sell. And rebar prices, which were higher. Now they have slightly come down in the month of February also. And HRC [indiscernible]. So more or less, you can say they are a part.
To the question on the export options for the industry, given that Europe prices...
Exports up to March, everybody is booked. SAIL is less on exports and concentrating more on the domestic market. But the others, what we have come to know they are booked up to the March.
Are we seeing any import pressure in recent months in the industry level?
It was there. Now it is not there. At one point of time, it was there, but now it is not.
Next question is from the line of Kirtan Mehta from BOB Capital Markets.
It's good to see basically the steel plant coming up at different capacity now. I just wanted to understand the opportunity available in improving the product mix based on the existing plant configuration. So in this regard, I wanted to understand, is there the possibility to reduce this further below 9% of which we are operating?
Second, related partners. What is the utilization level in Universal Section Mill as well as medium section mill? And what sort of the improvement we can achieve there? The third related part was, are there any other products where we are operating at a lower utilization and where we can upgrade the product mix further?
As you are -- you have rightly said, the component of semis is gradually coming down in SAIL. And yes, we have got two new mills, if you see the USM and IISCO Burnpur and the medium structural mill in Durgapur. Medium structure mill have now stabilized, and we are getting orders even to the extent of our 50,000 tonnes per month. And the USM has also picked up from levels of, say, 15,000 to 20,000, which was there last year, and now it is at 35,000, and we continue to get orders.
So once the USM stabilizes, which will have a capacity round about 8.4 lakhs, it can be INR 70,000 per month. So I think this semi components will further come down.
And apart from these two mills, are there any other products where there is a possibility to increase the production level?
In the flat product range, there's not much except we may have -- we have got this Hot Strip Mill to do. So Hot Strip Mill 2, this is a new plant, we will try to ramp up that further. And that is also -- there's one good advantage that the product is very good of that and we'll get a higher NSR for that also.
The next question is from the line of Falguni...
Let this be the last question, please.
Yes, sir. It's from the line of [ Falguni Dutta from Jet Age Securities ]
Sir, I had just one question. We have seen a price increase of INR 6,000 per tonne in the secondary markets, HRC Mumbai from mid-December to now, 6,000 per tonne increase. So if steel prices were to remain where they are now, should we see this kind of an increase translating into our numbers in Q1 FY '24? .
This is -- basically, we are not too sure how it will happen and what is going to happen in Q1 '24 because the increase of coal prices, which are there, that is not having an impact in Q1 also. That will have a major impact in Q1.
Sir, I just wanted to know if -- sorry for interrupting. Assuming coking coal prices remain where they are and steel prices remain where they are, how do you see Q1 margins directionally better than Q4 or flat?
Maybe flat.
Ladies and gentlemen, that would be our last question for today. I now hand the conference back to the management for the closing remarks. Thank you, and over to you.
Thank you, Ashish Ji. And we hope to do well in this quarter. We are starting this quarter on a good note. And we are continuously getting support from the -- we have got a good support from the government in the form of the budget, where a lot of investments are being made in -- means investments have been made in infrastructure, which will also help us to a large extent in marketing our products. So we hope that this quarter and the year to come also will be good for us as well as the steel industry. Thank you very much.
Ladies and gentlemen, on behalf of Nuvama Institutional Equities, that concludes today's call. Thank you all for joining us, and you may now disconnect your lines. Thank you.