China steel oversupply ‘big worry’ for industry: JSW

Bloomberg

Steel supply from China, the world’s biggest producer, remains a “big worry” for the global industry, which continues to be under pressure despite an improvement in prices, JSW Steel Ltd. Chairman Sajjan Jindal said.
There is “‘huge overcapacity” in China and the industry is worried about how the Asian nation will address the issue, Jindal, who runs India’s second-biggest steelmaker, said in an interview after the company’s annual general meeting in Mumbai. “Our biggest concern is how China plays out and what they do as most of their businesses are run because of the highly subsidized policies of the government.”
While China has pledged to cut as much as 150 million metric tons of capacity by 2020, the nation continues to export its steel surplus amid the slowest growth in decades. Consolidation in the global steel industry will be crucial as the world adjusts to lower prices amid a global glut and declining demand, according to Tata Steel Ltd. Chairman Cyrus Mistry.
China’s exports climbed to the second-highest on record to 10.94 million tons in June, according to its customs administration. Chinese steel mills keep increasing shipments because they’re struggling to stay profitable and maintain market share, according to Bloomberg Intelligence.

SUPPLY PRESSURE
Consolidation would help the industry to remain competitive and being more disciplined with supply is critical for its future, Tata Steel’s Mistry said in the company’s annual report posted on its website last week. “It would be vital for the industry to look at supply-side restructuring to rebalance the demand-supply equation, especially in countries and regions where the oversupply situation is structurally acute.”
The company announced on July 9 that it was in talks with Germany’s Thyssenkrupp AG about a possible joint venture in Europe, even as it looks to sell its U.K. steel plants. That closely followed largest producer ArcelorMittal’s move to take control of Ilva, Europe’s top steel plant.
In the current environment, JSW Steel is not excited about acquisitions and would look to focus on consolidation in the domestic market and adding value to its products, Jindal said. The company will hold off capacity expansion for the next two years as it aims to reduce debt, he said.
JSW Steel will be reporting earnings for the first fiscal quarter ended June 30 on Wednesday. An average of 13 analysts’ estimates compiled by Bloomberg is for a 7.4 billion-rupee ($110 million) profit for the period. The shares have rallied 61 percent this year after prices climbed following a slowdown in cheap imports from China and as an increase in the company’s capacity boosted volumes.

IMPORT TAXES
“Every country in the world has been putting in anti-dumping duties and measures to protect them from China,” Jindal said. India should impose anti-dumping taxes on imports before the floor-price regime expires next month or the domestic industry will suffer again, he said.
India raised import taxes, levied safeguard duties till 2018 and imposed floor prices on shipments to stem the inflow and help domestic players. Steel imports slid 31 percent to 1.8 million tons in the three months through June from a year earlier, after rising to a record 11.7 million tons in the financial year ended March 31, according to steel ministry data. While production grew 3.8 percent to 24.5 million tons from a year ago, consumption was little changed at 19.9 million tons, it said.