JSW Steel to expand capacity to 1mn tonnes to gain from Trump's policies

JSW Steel plans to invest up to $500 million to improve capacity utilisation at is plates and pipes mill in Texas, US, expecting to gain from the Trump administration’s protectionist policy.

The US arm of the Sajjan Jindal group company also on Monday signed a memorandum of cooperation with the state of Texas to develop and augment steel industry. 

As part of the deal, Texas Governor Greg Abbott approved a grant of $3.4 million from the Texas Enterprise Fund for JSW Steel (US).

“The memorandum gives JSW access to natural gas at economical prices and ensures abundant availability of scrap steel in Texas, making conditions conducive for manufacturing through the electric arc furnace route,” Parth Jindal, director, JSW (US), told reporters.

JSW Steel’s Texas unit at present has a capacity utilisation of less than 30 per cent and the company plans to augment it three times to take production to 1 million tonnes over the next two years. 

This will create 500 jobs, with average annual salaries of $65,000, said Abbott.

Steel producers in the US hopes to benefit from the 25 per cent duty imposed by President Donald Trump’s administration on steel imports from all nations except Canada, Mexico, and Australia.

Sajjan Jindal had tweeted expressing support for the move.

As part of the planned upgradation, the company will invest $150 million to augment the unit’s capabilities. This capex programme is expected to be completed by March 2020.

The rest of the investment will be used to set up a hot-end facility to make steel “melt and manufacture”. This is subject to approvals.

The facility has had a tough time since the global financial crisis of 2008 as the steel used for the plant was imported from Mexico, Brazil, and India.

“We are working with the government, seeking exemption... (from import duty) for this project,” said Parth Jindal, adding: “The idea is to consolidate this facility to bring steel manufacturing back to the US.”

He added that the increased production would cater for Mexico and Latin America.

Abbott said the US government did not plan to shut down imports completely, despite the new tariffs on steel and aluminium.

JSW’s Baytown firm, located about 48 km from Houston, is one of the biggest steel plate and pipe mills in North America. It services the needs of energy, petrochemicals, defence and other heavy equipment industries with a demand for high-quality carbon plates.

With one of the widest mills in North America, the JSW plate division mill rolls hot-rolled plate widths up to 160 inches (4.1m) and thicknesses up to six inches (152.4mm). Steel is supplied to shipyards, oilfield fabricators, heavy equipment producers, machinery makers, and many other end-users and distributors who need high quality carbon plate.

JSW’s pipe division mill produces DSAW pipe to service energy and petrochemical markets, including large diameter line pipe for onshore and offshore use, heavy duty casing, and piling.

JSW Steel reported a 17 per cent year-on-year increase in its consolidated revenue from operations to Rs17,861 crore during the quarter ended 31 December 2017. Operating EBITDA increased by 37 per cent year-on-year to Rs3,851 crore, implying a margin of 21.6 per cent. Net profit after tax (after incorporating the financials of subsidiaries, joint ventures and associates) for the quarter increased to Rs1,774 crore.  Operating EBITDA increased by 27 per cent quarter-over-quarter while profit after tax increased by 112 per cent quarter-over-quarter.

The company's net debt increased by Rs696 crore to Rs42,068 crore by the end of December 2017 while the weighted average interest rate decreased by 23 bps quarter-over-quarter to 7.03 per cent.

Net debt to equity at a consolidated level was 1.68 times at the end of the quarter against 1.87 times at the end of the second quarter. Net EBITDA at a consolidated level stood at 3.32 per cent against 3.67 times at the end of the previous quarter.