JSW Steel is setting its sights on a stronger performance from its overseas operations while simultaneously targeting lower costs within its Indian operations in FY26. Several factors are expected to contribute to this resurgence, including strategic capacity expansions, increased demand, and cost-saving measures.

Overseas Operations: A Turnaround on the Horizon

JSW Steel's overseas operations have presented a mixed bag in recent years. While the Italian operations have consistently generated positive EBITDA, the US-based facilities, particularly the Ohio unit, have struggled with profitability, barring a brief period in FY22. The combined US operations reported losses in the first nine months of FY25, primarily due to a sharp decline in steel prices and volatile global markets.

However, JSW Steel anticipates a turnaround in FY26. The US operations are expected to benefit from the imposition of tariffs by the US government, which will help to level the playing field. Additionally, increased demand for plates from the renewable energy sector is projected to boost the performance of the US facilities. The Italian operations are also poised for further growth, with the anticipated signing of a bilateral rail agreement with Italian rail expected to increase volumes and EBITDA. JSW Steel expects their overseas operations to contribute positively to the company's overall EBITDA.

Domestic Cost Optimization: Securing Raw Materials and Enhancing Efficiency

JSW Steel is actively pursuing strategies to lower its costs in India. A key focus is on securing raw material supply. The company plans to commission three coking coal mines in India by the fourth quarter of FY26, which are expected to generate 2 million tonnes per annum (mtpa) of clean coking coal over the medium term. JSWL has also acquired two mines overseas - Illawarra mines in Australia, which is an operating mine and is likely to start the shipment of coking coal from April 2025, and Minas De Revuboe Limitada (MDR) in Mozambique, a pre-development stage hard coking coal mine.

By increasing its backward integration for iron ore and coking coal through raw material security, JSW Steel aims to reduce its susceptibility to price volatility. Furthermore, the company is focused on reducing power costs by increasing the share of renewable power in its energy mix. JSWL met most of its power requirements for its domestic production through captive plants with a total capacity of around 2,000MW as of March 31, 2024. Increased production of value-added products in the company's sales mix should further boost profitability.

JSW Steel's cost-efficiency programs, including pellet plants, coke ovens, sinter plants, and captive power plants, are expected to generate substantial cost savings, leading to higher profitability despite potential fluctuations in steel prices. The full impact of the company's capacity expansion is expected to materialize in FY26.

Capacity Expansion and Production Targets

JSW Steel is undertaking significant capacity expansion projects. The 5 mtpa expansion at JSW Vijayanagar Metallics Ltd (JVML)-Vijayanagar is ramping up well. The company has guided 30.5 million tonne (mt) production and 29.2 mt sales volume for FY26. With the ramp-up of additional capacity in Vijayanagar (5mtpa) and in BPSL (1mtpa), JSWL's EBITDA per tonne is expected to improve in FY26.

External Factors and Government Support

The Indian government's measures to support the domestic steel industry will also play a crucial role. The Directorate General of Trade Remedies (DGTR) has recommended the imposition of a 12% provisional safeguard duty for 200 days on certain steel products, aiming to protect domestic players from a surge in imports. Experts anticipate that India's steel imports could reduce by 50% in FY26 due to the safeguard duty. This safeguard duty could lead to a 16-17% increase in JSW Steel's FY26 EBITDA.