Steel Mills

JSW Steel USA Struggles in Latest Quarter

October 25, 2019

JSW Steel divisions in Ohio and Texas both reported EBITDA losses in the second quarter of FY 2019-20. The Ohio mill increased production and revenue, which was offset by inventory writedowns and lower steel prices during the quarter.

JSW Steel-Ohio produced 87,337 metric tons of hot rolled coil during the quarter, an increase from 80,037 MT in Q1 FY 2019-20. Sales volume increased to 98,063 MT, compared to 71,362 MT the prior quarter. The mill reported an EBITDA loss of $31.6 million, which included an inventory writedown of $13.2 million. EBITDA loss in the previous quarter was $36.12 million with an inventory writedown of $18.95 million.

The Mingo Junction mill was purchased by JSW Steel in June 2018 and the hot strip mill restarted the following month using purchased slabs. The EAF slab caster began production in December 2018 and continues to ramp up.

JSW’s U.S. Plate and Pipe Mill in Baytown, Texas, produced 58,206 MT of plate and 15,7465 MT of pipes. Capacity utilization was 25 percent at the plate mill and 11 percent at the pipe mill. Sales volume was 53,333 MT of plates and 7,020 MT of pipes. Revenue from operations totaled $59.12 million compared to $106.5 million in the previous year’s quarter. The segment reported an EBITDA loss of $11.2 million due to lower steel prices and an inventory writedown of about $3.5 million.

JSWresults

“Again, this quarter, they came into the red because the steel prices in the U.S. have come down, so the capacity utilization was lower,” said JSW Steel Limited CFO Seshagiri Rao during the company earnings call. “Number two is inventory losses, which we had to take in this quarter. Now the first part of the capacity expansion, the modernization of the Plate and Pipe mill, was completed. So, the benefits we expect will start coming in from third quarter onwards in the Plate and Pipe mill.”

The Baytown facility uses purchased slab to produce hot rolled plate for use by a variety of industries as well as providing plate for the Baytown pipe division. The pipe division produces Double Submerged Arc Welded (DSAW) pipe used in the oil and gas industry.

JSW Steel USA broke ground for a new EAF at Baytown in October 2018, but has put the project on hold until market conditions improve. The company is also suing the U.S. government for denying its application for tariff exclusion. The suit is the first exclusion case to reach the U.S. Court of International Trade.