JSW Steel Ltd, India?s third-largest steel manufacturer, seems to be awaiting a revival in demand for its Rs 35,000 crore, 10-million tonne West Bengal project to take off.
The steel industry has been severely hit by the recession globally, particularly in the US, which has led to a drastic decrease in demand. JSW was to produce semi-finished product slabs in its West Bengal unit and export a part of it to its US operations, but the severity of the downturn has forced the company to delay the project.
?It all depends on revival in the US economy. By the end of December this year, when things look clearer, we will look at all options,? JK Tondon, director of projects, JSW Group, and chairman of JSW Cement Ltd, told FE.
JSW Steel Ltd shares on Monday were up 3%, to close at Rs 567.30 on the Bombay Stock Exchange.
Meanwhile, the company has acquired 4,300 acres in Salboni (West Bengal) and has even build a boundary wall.
The company was planning to set up the project in phases, with a three-million tonne capacity plant due to come up initially. But it soon ran into rough weather and was unable to achieve financial closure for the first-phase investment of Rs 10,000 crore.
The reduced demand in the steel sector then forced the company to rewrite its project plan and slash investment in the first phase of the project by 60% to Rs 4,000 crore.
The capacity utilisation for the steel sector in the US is below 50% and JSW operations there are also currently operating at a low capacity utilisation of 10-15%.
Seshagiri Rao, Joint MD of JSW Steel, was reported as saying, “Considering the fall in demand, the company will temporary shut down its Texas-based 1.2-million metric tonne mill that produces plates and pipes.”
Experts say the company is currently over-stretched and will not be able to go ahead with the West Bengal project at least for now.
The maker of long and flat steel products slipped into a net loss for its fiscal fourth quarter, mainly due to inventory writedowns in the US.
JSW posted a consolidated net loss of Rs 39.93 crore for the fourth quarter ended March 31, against a net profit of Rs 356.79 crore in the corresponding period last year.
