India's largest steelmaker JSW Steel on Monday announced it would consider an investment of upto $500 million in phases to develop its steel manufacturing infrastructure in Baytown in Texas. JSW would be aided by a $3.4 million grant from the Texas Enterprise Fund as part of the memorandum signed with the Governor of Texas.
The investment would be made to undertake capability enhancement of its Plate & Pipe Mill unit located in the region. JSW, which has now rechristened its US operations as JSW USA, is already investing $150 million to augment the unit's capabilities. This capex programme is expected to be completed by March 2020. JSW USA intends to use rest of the investment, up to US $350 million, to set-up a new hot end facility to make their steel 'melt and manufacture' (subject to approvals). Around 500 new jobs are expected to be generated by this expansion.
It comes in the wake of US President Donald Trump hiking tariff on steel and aluminium industry to encourage the domestic industry.
"The Memorandum signed by Greg Abbott and JSW USA is part of our long-term strategy to enhance our US footprint. It reiterates our commitment to stay invested and grow in the US market," said Parth Jindal of JSW Group. "It also provides JSW USA with an opportunity to participate in USA's infrastructure development and job creation priorities. Access to natural gas at extremely economical prices and the abundant availability of scrap steel in Texas make conditions very conducive to manufacturing through the Electric Arc Furnace route."
JSW USA operates one of the widest steel plate and pipe mills in North America. Strategically located in Baytown, Texas, approximately 30 miles outside Houston, the unit services the needs of the energy, petrochemicals, defence and other heavy equipment industries in the USA who need high-quality carbon plate.
The company had bought the plant more than a decade ago as part of the acquisition of three companies in the US for $900 million (around Rs 3,690 crore) to get a foothold in the North American market. Known for its penchant for acquiring stressed assets and then turning them around, these were however, not one of JSW's better acquisitions.
While the three units were all loss-making in 2006-07, with net losses of $42 million against revenues of $510 million, JSW had expected to recover costs, including that of the acquisition, in four years.
Instead the company has had to write-off loans worth Rs 6,208.74 crore to the US holding company. In the first quarter of this fiscal, the US plate and pipe mill had an operating income of $5.1 million on revenues of $58.67 million, which suggest it is showing signs of recovery. However, JSW Steel (US) is still consistently making losses.