JSW Steel Q2 preview: Weak demand, volatile prices, oversupply to shrink margins

Copyright © HT Digital Streams Limited All rights reserved. Dipali Banka 5 min read Oct 16, 2025, 02:25 pm IST In August, JSW Steel announced a joint venture with South Korea’s POSCO Holdings to set up a 6 MTPA plant, likely also in Odisha. (Reuters) Summary JSW Steel’s performance in Q2 FY26 is expected to suffer due to seasonal demand weakness, low-priced Chinese steel and margin pressure from a prolonged monsoon. Analysts are predicting a 2% drop in revenue and a 12% drop in Ebitda, despite volume growth. Seasonal demand weakness, sustained pressure from low-priced Chinese steel, margin squeeze due to a long monsoon, volatile prices and an oversupplied market are likely to have hurt the performance of JSW Steel in the second quarter of fiscal year 2026 (FY26), analysts said. The company controlled by billionaire Sajjan Jindal started FY26 on a strong note but struck a note of caution for the second quarter precisely for these reasons. The company is expected to report its second-quarter earnings on Friday. Since the start of FY26, China’s hot-rolled coil (HRC) prices have risen by around 4.5% in rupee terms, while domestic prices have fallen by around 5% even after a safeguard duty was imposed, mainly due to higher supply, according to an Elara Capital report dated 14 October. The duty imposed in April was intended to protect local producers from cheap Chinese imports. China’s HRC prices act as a leading indicator for global steel prices and the recent divergence in Indian prices is mainly due to higher supply in the domestic market, analysts said. JM Financials and Elara Capital said in their October notes that they expect steelmakers’ margins to shrink in the second quarter due to lower steel prices of both MRC and long steel products. Analysts at JPMorgan expect JSW Steel’s revenue to decline 2% sequentially to ₹42,346 crore and earnings before interest, tax, depreciation and amortization (Ebitda) to decline 12% quarter-on-quarter even after volume growth, mainly as average selling prices weakened during the quarter. JSW Steel’s Ebitda per tonne is expected to decline due to a mismatch between demand and production, rising iron ore costs and lower steel prices, said Parthiv Jhonsa, vice president at Anand Rathi Institutional Equities, adding that the company’s 20% exposure to long steel products will also weigh on earnings. Analysts at JM Financials estimate that Ebitda per tonne will decline by ₹1,700 per tonne to ₹8,800 per tonne. Excess inventory Scrap production exceeded consumption in the country in H1. Prolonged monsoon showers have slowed construction and infrastructure activity, affecting demand and causing inventories to build. To clear inventories, sellers offered discounts, leading to pressure on steel prices. And, despite safeguard duties and strict quality standards, India remains a net importer of finished steel, which has added pressure on domestic prices. However, there have been some bright spots for JSW Steel since the June quarter. The company has Saffron Resources Pvt. Ltd., through which it owned about 900 acres of land in Odisha which could be used for future expansion. In August, the steelmaker announced a joint venture with South Korea’s POSCO Holdings to set up a 6 MTPA plant, likely also in Odisha. This JV adds to JSW’s growing portfolio of international partnerships—it already has a tie-up with JFE Steel of Japan. Investors and analysts will watch for the capital expenditure on this project, which has not been specified. The company had earlier said it plans to spend ₹62,000 crore over the next three years, with ₹20,000 crore to be spent in FY26. In a boost to the company, the Supreme Court has cleared its ₹19,700 crore plan to take over bankrupt Bhushan Power and Steel Ltd, marking the end of one of India’s longest insolvency battles. This removed the uncertainty among analysts about the company reaching annual capacity of 50 million tonnes per annum (mtpa) by 2030. “With the Bhushan case over and the overall overhang behind us, I am quite confident that they will be on track to achieve a target capacity of 50 million tonnes per annum by 2030,” Jhonsa said. The stock has gained 28% since the start of the year, significantly outperforming the Nifty’s 7% rise in the same period, a sign of continued investor confidence in the company. Company guidance Analysts will also be looking for any revisions to the company’s volume guidance for FY26 since production increased in the September quarter. Consolidated production for JSW Steel was up 9% sequentially and 17% from a year earlier. The steelmaker’s production guidance for FY26 stands at 30.5 million tonnes while sales are projected at 29.2 million tonnes. Commentary on steel prices and commodity guidance for the second half will also be in focus as steel prices are expected to strengthen after Diwali, Jhonsa said. This will determine the outlook for the next two quarters of the fiscal. Analysts at JM Financials expect spreads—the difference between the selling prices of steel and their production costs—to improve in the second half of the year, supported by a recovery in China’s HRC prices during the second quarter, the Indian government’s move to close loopholes in safeguard duties, and the extension of import duty protection from 200 days to three years. Additionally, the second half is typically a seasonally strong period for demand. Investors will watch for updates on expansion initiatives and their timelines. For the long term, analysts and investors expect the company’s target of 50 million tonnes to be achievable as ongoing expansion projects at Dolvi (5 million pa) and Vijaynagar (2 million pa) are expected to bring capacity to 41.9 million pa by FY28. According to a JM Financial note dated July 30, to strengthen raw material security, the company aims to operationalize three iron ore mines in Karnataka by 2Q of FY26, targeting production of 15 million tonnes of captive ore in FY26. In Goa, JSW plans to start mining at the Cudnem mine in 3Q, while the Surla and Codli mines are expected to start production in the second half of FY27. The company plans to operationalize its coking coal and iron ore mines as part of its first-phase expansion and updates on their timelines will be key for analysts. Get all the corporate news and updates on Live Mint. Download the Mint News app to get daily market updates and live business news. more topics #Steel #JSW Steel #Result preview Read next story