Outlook

JSW Group’s core business – the manufacture of high-quality coking coal, a strategic raw material – is closely aligned with the European steelmaking value chain, although it is often incorrectly associated with thermal coal. The Group predominately mines and processes coking (metallurgical) coal, which is used in steelmaking.

In September 2020, the European Commission once again confirmed the status of coking coal as a raw material of strategic significance to the economy by entering it onto the list of 30 critical raw materials characterised by a higher risk of supply shortages and graver effects for the economy than in the case of other raw materials.

The main challenge that the mining industry is facing is an escalation of requirements related to the protection of the environment and climate, including CO₂ emission reductions. In the light of major changes in market expectations, JSW is continuously reducing its production costs by increasing productivity, expanding its resource base and taking account of challenges related to safety, environmental protection and corporate social responsibility in everything it does.

JSW Group is closely watching the situation in industry and adapting to the evolving coal, coke and steel markets on an on-going basis. JSW S.A.’s Strategy 2020-2030, which also encompasses its subsidiaries, constitutes a response to the challenges arising from a dynamically shifting market background, economic situation and changes in the Group’s structure, as well as challenges related to maintaining stable growth and meeting stakeholder expectations in the long term. In order to adapt to the changes taking place, the Group decided to update its business strategy. Additionally, legislative changes in European legal acts gave grounds to extend the strategic timeframe to 2050.

Conditions on global markets for the Group’s key products are driven by the major buyers and suppliers of these raw materials, namely China, Australia and USA, particularly through the individual supply-demand relationships between them. Aside from the supply-demand relations, especially between Asia and Australia, impact also comes from one-off events in the form of logistics difficulties resulting from, for example, sudden and unforeseen weather changes, geological conditions and crises such as the coronavirus pandemic, which in the first quarter of 2020 caused Chinese manufacturing capacities to decline by an average of 40-60%, depending on the sector. JSW Group is exposed to swings in global demand and supply as well as changes in market conditions in extractive industries and the steel sector. Changes in production capacities in China have an adverse effect on businesses throughout the world because Chinese industry is present in most of the global supply chains and the value-accretion processes of international corporations. Disruptions in supplies from China have an impact on the financial results of a majority of global businesses in numerous industries and sectors.

Short-term outlook (2022)

In the short term, the coal, coke and steel markets will continue having to deal with the fallout from Covid-19 or the post-pandemic reality. This will be a period of revival in demand for steel and thus on the raw materials used to produce it, i.e. coke and coking coal. Trade is expected to stabilise after major disruptions and supply chains will be rebuilt. On a short-term basis, trade in commodities will be subject to the heightened commercial tensions between China and Australia and China’s informal ban on Australian coal imports, which has changed the destinations and prices for this commodity.

Mid- and long-term outlook (2030, 2050)

The blast furnace process remains the dominant steelmaking method both in Europe and globally, accounting for more than 70% of world steel output. Electric-arc furnace steelmaking represents approx. 25%. Many European steelworks use the pulverised coal injection (PCI) technology.

Steelmaking technologies that reduce or eliminate the use of coke and thus also coking coal in the process are expected to be expanded by 2030. This is intended to pursue more ambitious emission reductions targets in the European Union. These technologies are currently being researched or pilot-tested and are not yet economically feasible. The blast furnace process, which uses coke and coking coal, will continue to dominate the steelmaking landscape in emerging countries with strong growth potential in steel output.

Even though the European Commission has announced support for clean steelmaking technologies by 2030, many experts claim that replacing coke in the pig iron smelting process in blast furnaces will not be possible in the next 25 years.

Compliance with legal regulations pertaining to the natural environment and use of natural resources – reducing greenhouse gas emissions and the EU Strategic Plan on Methane, which is currently in development – will be a major challenge for JSW Group in the mid- to long-term. As the industrial revolution progresses, JSW Group plans to actively use scientific and technical achievements, engaging its intellectual capital and implementing the latest technological solutions for mining.

To reduce its adverse impact on the natural environment, JSW Group will engage in a range of initiatives intended to increase the economic use of methane and coke oven gas in electric and thermal energy generation and to contribute to energy independence through the use of carbon-related products or the separation of hydrogen from coke oven gas, which is a major project supporting achievement of the objectives stated in the Strategy.

In the long term, if the project related to the production of methane, which is being treated as fuel of the future, JSW will be capable of effectively producing this ecological source of energy at its coking plants. A successful installation would make it possible to use hydrogen in zero-emission urban transport in the future.

As regards long-term perspectives for the steel sector, the trend of emission reductions and attempts to replace steel with other technologically advanced materials should be expected to continue. There is no alternative to steel at present because of its unique properties – durability and 100% recycling – and due to its mass-scale production.