Manufacturing operations at a steel plant in Netherlands (Photographer: Jasper Juinen/Bloomberg)

JSW To Invest $500 Million In Newly Acquired U.S. Steel Plant

Sajjan Jindal-led steelmaker JSW Steel Ltd. said it plans to invest up to $500 million in an integrated steel manufacturing unit with a potential capacity of three million tonnes per annum at Ohio, U.S.

The investment in Acero Junction Inc. takes JSW Steel's net investment in the U.S. to $1 billion, the company said in an exchange filing. It acquired the unit earlier this month for an enterprise value of $182.41 million (Rs 1,240 crore)—including $101.56 million (Rs 690 crore) debt.

The announcement comes days after U.S. President Donald Trump imposed tariffs on imported steel and aluminum products on some of its allies, including Canada, Mexico and the European Union.

The acquisition will be part of the capital expenditure announced in the quarter ended March, said Goutam Chakraborty, analyst - institutional research, Emkay Global Financial Service. Its inability to clinch any asset in the insolvency proceedings in India and higher utilisation levels of factories in the U.S. due to imposition of tariffs on steel and aluminium imports have “apparently made the company embark on an overseas expansion strategy”, he said.

Acero Junction unit has a capacity of three million tonnes per annum, raising JSW Steel’s output in the U.S. to 4 MTPA. The company also owns a 1 MTPA plant at Baytown in Texas.

The fresh investment will be made in two phases. In the first phase, JSW Steel will revamp and restart the unit’s electric-arc furnace and slab caster and modernize its hot-strip mill at a cost of $250 million. The second phase entails making the plant a fully-integrated facility by adding another electric-arc furnace and other manufacturing equipment.

JSW Steel plans to supply American melted and manufactured hot-rolled coils from the unit.

With improving demand in U.S. and support from trade measures, JSW Steel is investing in upgrading and increasing the scope of the U.S. plate and pipe mill. It has already applied for environmental certificate for the electric arc furnace.
Motilal Oswal on JSW Steel’s U.S. acquisition

JSW Steel expanded its capacity in India from 11 MTPA to 18 MTPA, betting on improved demand as the global economy revived after the 2008-09 crisis. The steelmaker acquired Ispat Industries Ltd. and invested in its Vijayanagar (Karnataka), Dolvi (Maharashtra) and Salem (Tamil Nadu) plants to boost output. It targets to increase its overall capacity to 23 MTPA by March 2020.