JSW Steel cuts US capex by 60%
However, it will stay the course on its ₹15,000-crore India investment plan
JSW Steel has cut its capital expenditure plans in the US by 60 per cent to $400 million due to weak demand and a slowing economy.
However, the company has decided to go ahead with its ₹15,000-crore capex plan in India despite the sharp drop in demand amid liquidity concerns.
Last year, the company had plans to invest $500 million each in two of its steel plants at Baytown in Texas and Ohio to enhance capacity and improve operational efficiency.
Seshagiri Rao, Joint Managing Director, JSW Steel, told BusinessLine that the company had already invested $250 million in restarting production at Mingo Junction in Ohio in the first phase and similar amount was to be invested in the second phase which has been put off till the demand improves.
Similarly, he said in Baytown, the company had invested $150 million but has put off construction of a new electric-arc furnace with an investment of $350 million until market conditions improve.
The capacity utilisation at present in the US is very low and the company wants it to improve substantially before taking a call on incurring further capex, he said.
Tata Steel’s woes
Interestingly, the global aspirations of both the Indian steel majors — Tata Steel and JSW Steel — have gone haywire and become a drag on their financials.
Debt-laden Tata Steel’s efforts for long to divest both its struggling South-East Asian and European operations have failed.
Last month, Tata Steel said it called off plans to sell a majority stake in its South-East Asia steel business to China’s state-run HBIS Group as it was not able to get regulatory approvals.
Similarly, the regulatory authorities have rejected Tata Steel’s plan to merge its European business there with ThyssenKrupp. Now, the company is selling of these businesses in bits and pieces.
Bullish on India
Despite deferring global investments, JSW Steel is not holding back its ₹15,000 crore investment at Dolvi in Maharashtra and enhancing downstream production capacity.
“We are going ahead with the investments in India as they are in the last stage of completion and is expected to go on stream by end of this fiscal,” said Rao.
JSW Steel will be doubling its production capacity at its Dolvi unit to 10 million tonnes per annum and enhancing tinplate, colour coated, galvanised sheet and other value-added products capacity at different locations by the end of this fiscal.
However, Tata Steel, which has a debt of about ₹1 lakh crore, said it is cutting down on capex for this fiscal to ₹8,000 crore from ₹12,000 crore due to challenging market conditions.