JSW Steel’s US biz poised for a turnaround
With its US operations gearing up for over 80 per cent capacity utilisation levels from the June quarter of FY22, Sajjan Jindal-led JSW USA is poised for a complete turnaround after close to a decade.
“With modernisation of the Baytown plate mill (in Texas), the utilisations will more than double, leading to conversion costs reducing by 33-40 per cent. This will ensure sustained positive earnings along with (positive) net income, insulating the business from the cyclical nature of steel,” Parth Jindal, director of JSW USA, told Business Standard during a recent interaction.
All along, the capacity utilisation of the Baytown unit was hovering at the 3040 per cent mark.
The unit comprises a 1.2million-tonne plate mill, along with a 0.5-milliontonne tone pipe mill.
The Baytown unit will be sourcing its raw material in the form of crude steel slabs from its own Mingo Junction plant in Ohio, which has a capacity of close to 1.5 million tonnes.
The Sajjan Jindal group seems to be doing everything this time to close the loose ends of the decade-old business, which it had acquired for almost $1 billion from Prithviraj Jindal in back in 2007.
JSW Steel USA Ohio Inc, a subsidiary of JSW Steel, has also signed a five-year tolling agreement with Allegheny Technologies Inc (ATI) to divert surplus carbon steel slabs of its Mingo Junction unit to deliver high quality hot-rolled coil (HRC) products.
“This agreement is expected to take Mingo Junction product realisation up by 6-7 per cent on sales quantity compared to previous levels. It is a win-win for both JSW as well as ATI since we both will be able to up our utilisation levels,” said Parth Jindal.
Witnessing dull business with prices and demand for steel tanking in 2020 due to Covid-19, Jindal shut its Mingo Junction plant in July last year and the Baytown unit in September for modernisation.
The company also laid off all its 550 employees at the two plants last year. “It was the right decision though a tough one. The idea to modernise was to up technology at the unit and reduce manpower level,” added Jindal.
Early 2021, the company started to hire at both its units as it began operations at Mingo Junction in March and at Baytown in February.
Hiring at the units has been a combination of old as well as fresh recruits with total count around 530 at present. It aims to stabilise manpower at 530-600 employees.
“Post modernisation (of the two units), the productivity of the employees has gone up. Earlier, the units produced 350,000-400,000 per annum and now with almost the same workforce, we will be producing 1.5 million tonne per annum,” said Jindal.
Despite the ongoing pandemic, Jindal is hopeful of sustainable demand for steel as the US goes for vaccination in a big way amid the Biden government ratifying the more than $2 trillion infrastructure Bill.
According to analysts, while the US operations are a small part of the consolidated performance of JSW Steel, the company’s subsidiary has been bleeding the longest since acquisition. Hence, a turnaround plan amid the pandemic would be eyed closely.