China’s market crash is spreading around the world. JSW is already facing turmoil

What is happening now in the Chinese steel industry has a strong impact on the rest of the world. The crisis in the Middle Kingdom could mean that tough times are coming for JSW – Europe’s largest producer of coal for the steel industry. – If JSW’s results deteriorate significantly, the company will also have to look for job cuts – predicted Jakub Szkopec, an analyst at Erste Securities, in an interview with WNP.PL.

• China’s steel industry is in poor shape. By 2024, Chinese construction workers’ demand for steel is projected to fall by another 10%.
• – Further declines in steel production in the Chinese market are likely, which may be linked to lower demand for coking coal and lower prices – points out Jakub Szkopec.
• The “Chinese decline” means tough times for Jastrzębska Spółka Węglowa, Europe’s largest producer of coal for the steel industry. The company may also have to look for staffing savings.

– In the case of Jastrzębska Spółka Węglowa, we will see in the second and third quarters of 2024 what happens on the coking coal market, including the decline in prices for this raw material – Jakub Szkopec, an analyst at Erste Securities, confirms in an interview with WNP.PL. – In the second quarter, EBITDA, i.e. the increase in operating profit due to consumption, may amount to about PLN 260 million. However, these forecasts for Jastrzębska Spółka Węglowa do not take into account possible provisions for bonus payments to employees in the second half of the year. If these results appear in the results, JSW’s loss for the second quarter may be at the level of EBITDA, he adds.

JSW faces another quarter of poor results. Shares are dwindling

As the analyst points out, with such results, the decrease in cash reserves in the second quarter of 2024 may amount to about PLN 700 million.

– Looking at the third quarter and coking coal prices, it can be seen that even if coal production at the Jastrzębska Spółka Węglowa mines increases to almost 3 million tons in the third quarter, the EBITDA will only be PLN 100 million. So it will be another quarter of bad results. At the same time, PLN 500-700 million will be lost again – points out Jakub Szkopec.

Further decline in steel production in the Chinese market could mean lower demand for coking coal.

Our interviewer points to the poor state of China’s steel sector as the reason behind the economic turmoil in the coking coal market.

– Corrugated bar prices in China have fallen to their lowest level since 2017. At these price levels, the Chinese steel industry is losing money. There are expectations that in 2024, demand for steel in the Chinese construction industry will fall by another 10%. Further declines in steel production in the Chinese market are likely, which may be linked to lower demand for coking coal and lower prices for it – adds an analyst at Erste Securities.

Jacob Szkopec points out that prices range between US$205-210 per tonne of coking coal (Australian).

– There is a high probability that these prices will drop to $200 or even below this level in the coming weeks. So, as you can see, this is a difficult time for Jastrzębska Spółka Węglowa. If the head of the August 80 trade union, Bogusław Zittek, is right that JSW’s coal production may reach 12-12.5 million tons this year, then this fact suggests that the results in the second half of 2024 will remain poor. And the excess cash on the balance sheet will disappear by the end of 2025. If JSW’s results deteriorate significantly, the company will also have to look for savings in staffing. There are different possibilities here – emphasizes Jakub Szkopec.

From a billion dollar profit to a loss. JSW is witnessing turmoil in the global economic situation

In the first quarter of this year, the Jastrzębska Spółka Węglowa capital group recorded a net loss of PLN 9.7 million. A year ago, the group ended the first quarter with a profit of over PLN 1.266 billion.

The Jastrzębska Spółka Węglowa Capital Group is the largest producer of hard coke in the European Union and one of the leading companies in the production of coke used in steel smelting. The production and sale of coke, as well as the production and sale of coke and carbon derivatives, are the core activities of the JSW Group.

Coke extracted in JSW mines in Central Europe is used by local steel mills of international steel producers. Coke produced by JSW Group is also sold on the world market. The main beneficiaries of JSW Group products are customers in Poland, Germany, Austria, Czech Republic, Slovakia, Italy and India.