JSW Steel likely to shut down Texas plant

India's second-largest steel maker in the private segment, JSW Steel, is likely to shut down one of its recently-acquired steel mills in the US. ''A decision will be taken in another month" depending on its orderbook and demand, joint managing director and group chief financial officer M V S Seshagiri Rao said in Mumbai on Tuesday.

The Texas plant has a capacity of 1.2 million tonnes per annum. A decision is likely by the end of this month. "Demand in industries such as ship building is not good, which is why we are looking at shutting the plant," Rao told reporters on the sidelines of a steel conference.

Currently, the plant is running at 10-15 per cent of capacity. "We have enough stock with us to feed our pipe mill in the US. Alternatively we can buy from the local market," Rao said. The Texas mill has a staff of 300 employees, but Rao said that there would be ''no job cuts''.

Last week, the company had declared that it was not planning to sell these loss-making units. (See: JSW to hang on to its US units). In 2007, the Indian steel producer acquired plate and pipe mills in US to expand overseas. But the economic down turn has forced end-users to delay or postpone projects in the oil and gas sectors, hurting demand.

The maker of long and flat steel products slipped into a net loss for its fiscal fourth quarter, due mainly to inventory writedowns in the US. JSW posted a consolidated net loss of Rs39,930 crore ($8.3 million) for the January-March quarter, compared with a net profit of Rs357 crore in the year-earlier period, as it wrote down $59 million Rs289 crore of inventory at its US unit.

In any case, Rao said that JSW plans to close down its US mills for three months from June due to poor demand, but carry on upgrading and modernisation work in the interim, as the cost is ''not much'' and the company expects better times ahead.

The Sajjan Jindal-run JSW Steel had acquired the US plants in November 2007 for $800 million from Jindal Saw, owned by his elder brother P R Jindal. Following the acquisition, JSW turned around these units and reported an EBIDTA of $46 million in the first five months of operations up to 31 March 2008. The company further reported EBIDTA of $75 million in the first six months of fiscal 2009. However, times have changed drastically since then.