Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Jindal Stainless Steel (JSL) has managed to secure funds to exit debt restructuring program. Below-cost imports of flat stainless steel products from China, Indonesia and other free trade agreement (FTA) countries have hurt the margins of Indian stainless steel producers and weakened their ability to service debt.


Margin compression

Dumping of imported stainless steel in the local market is hurting the company’s margins, indicated JSL’s Q3 earnings report. India has an inverted duty structure wherein the steel industry pays 2.5pc import duties on raw material from FTA countries, but finished steel imports are duty-free. These trade policies are forcing Indian steel companies to keep their selling prices 7-10pc below their production cost.


JSL has an annual stainless steel manufacturing capacity of 1.1mn mt. The company’s integrated steel plant at Jajpur, Odisha has a captive annual ferrochrome capacity of 250,000mt, which is scaleable to 3.2mn mt. 


Anti-dumping duty

India consumes over 2mn mt of stainless steel annually, of which 0.3mn mt is imported, comprising mostly of automotive steels. In Apr-Dec 2019, India’s imports of SS from free trade countries (FTA) surged up by 110pc to 419,668mt of stainless steel from 199,572mt last year, according to JSL. This deluge of imports distorted the domestic SS market.

Anti-dumping duty and countervailing duty imposed by the Indian government have been consistently circumvented by exporters from China and other Asian countries. The company has been lobbying for the imposition of higher anti-dumping duty on stainless steel imports from China and FTA countries. Indian Stainless Steel Development Association (ISSDA) has urged the government to impose 12.5pc import duty on certain stainless steel flat products.



JSL has managed to exit the Corporate Debt Restructuring (CDR) framework after a consortium of lenders were fully recompense with an aggregate sum of Rs8,330mn. Earlier, JSL’s promoter group infused equity and JSL issued bonds to fund the redemption of preference shares issued to lenders. The CDR’s tenure was prolonged as the company’s profit margin were impacted by below-cost dumping of SS flat products into India, according to JSL. JSL entered CDR in 2010 with a debt of Rs80,000mn and the deadline for closure was March 2020.

For the December quarter (Q3) sales volume increased by 17pc to 239,283mt from 204,083mt a year ago. Expected sales volume for the FY2020 is 940,000mt compared to 852,480mt in 2019 and 778,900mt in 2018. JSL exported 51,369mt steel in Q3, up by 39pc from 36,954mt in the prior year. In Q3, JSL posted a profit after tax of Rs560mn, up by 7pc from a year ago. Net revenue was Rs31,790mn from Rs31,280mn in the prior year quarter. 

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