Can JSW Steel’s October output and Illawarra stake raise margin visibility in FY26?

JSW Steel Limited (NSE: JSWSTEEL, BSE: 500228) has reported a consolidated crude steel production of 2.495 million tonnes (24.95 lakh tonnes) for October 2025, reflecting a 9 percent increase year-on-year. Despite the temporary shutdown of a blast furnace at its flagship Vijayanagar facility, the Indian steel producer has delivered resilient production volumes, indicating operating efficiency across its core domestic assets.

The monthly output update follows JSW Steel’s announcement that it has expanded its effective economic interest in Illawarra Metallurgical Coal to 30 percent, a strategic move aimed at deepening control over coking coal supplies. With India’s steel demand set to accelerate amid rising infrastructure investments, JSW Steel’s combination of upstream integration, brownfield expansion, and value-added portfolio realignment is shaping up to be a core differentiator heading into FY26.

How is JSW Steel balancing expansion with near-term operational constraints?

The October production update underscores both strength and temporary softness in JSW Steel’s operations. While domestic crude steel output rose to 2.412 million tonnes, up 10 percent from October 2024, the company acknowledged a dip in capacity utilisation to 83 percent. This was due to the planned shutdown of Blast Furnace 3 at the Vijayanagar plant, which is undergoing a capacity upgrade from 3.0 million tonnes per annum to 4.5 million tonnes. Excluding BF3, JSW Steel reported capacity utilisation at approximately 92 percent for the month.

The BF3 unit is expected to resume operations in February 2026, which will help restore full capacity at India’s largest single-location steelmaking facility. JSW Steel’s U.S. operations, primarily at its Ohio plant, produced 83,000 tonnes of crude steel in October 2025, broadly flat from the year-ago period.

Despite the Vijayanagar disruption, analysts tracking the sector interpret the stable volume growth as a sign of operational depth and contingency planning across JSW Steel’s diversified manufacturing footprint.

How does the Illawarra stake increase support JSW Steel’s input cost strategy?

JSW Steel has steadily worked to increase its upstream integration in critical feedstock categories, especially coking coal. In October 2025, the company disclosed that it raised its economic interest in Illawarra Metallurgical Coal via multiple layers of corporate ownership through an incremental investment of USD 60 million. The transaction gives JSW Steel a 30 percent effective economic interest in the Australian asset, up from 20 percent previously.

This was executed by acquiring non-voting Class B shares in M Res NSW HCC Pty Ltd and subscribing to newly issued Class B shares. M Res NSW then used a portion of the proceeds to acquire an additional 6 percent stake in Golden M NSW Pty Ltd, bringing its shareholding in Golden M to 36 percent. Golden M indirectly owns 100 percent of Illawarra Metallurgical Coal, which has averaged 6.4 million tonnes in annual production over the past five years.

Importantly, this increased stake also entitles JSW Steel to proportional offtake rights, now at 30 percent of total production from Illawarra, which provides enhanced supply chain predictability in an increasingly volatile metallurgical coal market.

What does this mean for JSW Steel’s cost competitiveness and balance sheet?

From a capital allocation standpoint, the Illawarra transaction highlights JSW Steel’s sustained appetite for long-term resource control, even as it maintains disciplined leverage metrics. As of Q2 FY26, the company reported net gearing of 0.93x and a liquidity buffer of ₹19,077 crore. Its funding mix includes 58 percent foreign currency debt and 29 percent bond market participation, including sustainability-linked bonds issued since 2021.

With this framework, JSW Steel is also developing additional raw material linkages in India. The company owns 23 iron ore mines with 1.6 billion tonnes of reserves and has already operationalised 12 of these, including a 24-kilometre conveyor system in Karnataka and a 302-kilometre slurry pipeline under construction in Odisha. On the coking coal side, the company is now supplementing its Illawarra stake with new assets in Jharkhand and a pre-development project in Mozambique with 800 million tonnes of reserves.

Collectively, this integrated resource strategy is intended to shield JSW Steel from spot-market volatility in both iron ore and coking coal, a recurring margin headwind for Indian steelmakers in past cycles.

What is the investor sentiment around JSW Steel’s FY26 outlook?

JSW Steel’s stock has been relatively resilient in recent sessions, trading in the ₹850–₹880 range in early November 2025. Institutional flows into the broader steel sector have shown a mild uptick post the Q2 FY26 earnings cycle, aided by expectations of increased infrastructure spending ahead of India’s general elections. Foreign institutional investors have remained net accumulators in JSW Steel over the past month, while domestic mutual funds have largely held their positions.

Brokerage sentiment remains skewed toward “Buy” or “Accumulate” recommendations, largely based on long-term structural capacity growth, raw material self-sufficiency, and leadership in value-added steel. Recent investor presentations have highlighted that JSW Steel’s value-added and special products now account for over 50 percent of total sales, and the company plans to raise this further by FY29 through expanded CRGO, CRNO, and automotive-grade steel lines.

One key variable to monitor is the timeline of the BF3 upgrade at Vijayanagar. While the shutdown is already priced in, any delay in its February 2026 restart could marginally impact FY26 consolidated EBITDA. However, with cost tailwinds from captive coal and ore assets, analysts believe JSW Steel remains on track to expand margins toward the ₹12,000–₹13,000 per tonne range, especially as high-margin value-added steel volumes rise.

How does this update fit into JSW Steel’s broader strategic roadmap?

JSW Steel is aiming to grow its crude steel capacity from the current 35.7 million tonnes per annum to 51.5 million tonnes by FY31. Of this, 50 million tonnes will be domestic capacity, and 1.5 million tonnes will be maintained in the United States. The roadmap includes brownfield expansions in Vijayanagar and Bhushan Power & Steel Limited, a 13 MTPA greenfield plant in Odisha, and a 4 MTPA green steel facility aligned with the company’s sustainability commitments.

JSW Steel has also commissioned a 25 MW green hydrogen electrolyser at Vijayanagar and aims to become carbon neutral by 2050, with a targeted 42 percent reduction in emissions by 2030. As of FY25, it has already achieved specific energy consumption reductions and water efficiency gains across integrated steel plants, while maintaining 100 percent zero liquid discharge status.

The company’s GreenEdge branded steel, CRGO expansion via joint ventures with JFE Steel, and growing exports across 100 countries form a three-pronged approach to market positioning: value, sustainability, and geographic diversification.

Key takeaways from JSW Steel’s October production update and Illawarra stake

• JSW Steel Limited reported consolidated crude steel production of 2.495 million tonnes (24.95 lakh tonnes) in October 2025, up 9 percent year on year.
• Indian operations produced 2.412 million tonnes in October 2025, a 10 percent increase over October 2024, despite a planned shutdown at Vijayanagar.
• Capacity utilisation for Indian operations was 83 percent for the month, and approximately 92 percent when excluding Blast Furnace 3 at Vijayanagar.
• Blast Furnace 3 at Vijayanagar is being upgraded from 3.0 MTPA to 4.5 MTPA and is expected to restart by February 2026.
• JSW Steel increased its effective economic interest in Illawarra Metallurgical Coal to 30 percent via investments routed through M Res NSW HCC Pty Ltd and related share subscriptions.
• The Illawarra stake expansion provides proportional offtake rights of 30 percent, strengthening JSW Steel’s coking coal supply security amid global volatility.
• Illawarra Metallurgical Coal has averaged around 6.4 million tonnes of production in recent years and sits alongside JSW Steel’s broader raw material strategy that includes 23 iron ore mines with 1.6 billion tonnes of reserves.
• The transaction aligns with JSW Steel’s integrated feedstock approach and supports margin resilience as the company scales value-added steel production and green initiatives.
• Institutional investor flows have been constructive, with foreign institutional investors adding to positions recently and brokerages generally maintaining buy or accumulate views based on capacity growth and raw material security.
• JSW Steel is targeting 51.5 MTPA of consolidated capacity by FY31 and is investing in decarbonisation measures such as green hydrogen and the GreenEdge low-emission steel brand.