JSW, Essar may ramp up production in N America

Domestic steel producers — JSW Steel and Essar Steel — are likely to ramp up production at mills in North America, which have been running at less than half the capacity. This follows ArcelorMittal’s decision to hike US sheet prices by $80-90 a tonne, with immediate effect.

Jatinder Mehra, chief executive officer, Essar Steel, said: “There appeared to be a spike in demand and, from July onwards, Essar Steel Algoma (in Canada) would be operating at 80 per cent capacity.” Essar, however, declined to comment on the capacity at which it was currently operating.

JSW Steel, which has been operating its US mills at 15-20 per cent, could also look at taking in higher volumes. Jayant Acharya, director (sales & marketing), JSW Steel, said: “The ArcelorMittal price move was good for us. We can look at restarting and taking in higher volumes.”

JSW completed the takeover of its US mills in 2007-08. On the back of a booming oil and gas sector in the US, JSW’s plants under JSW Steel (USA) Inc reported an EBIDTA (earning before interest, depreciation, taxation and amortisation) of $74.63 million from April 1, 2008, to September 30, 2008.

As the US economy was affected by the financial crisis, JSW Steel (USA) had to cut its production from October 2008. The company has prepared a conservative business plan for fiscal 2010, factoring the slow recovery in the US.

Essar Steel acquired Algoma in 2007. However, owing to the downturn, the production of Algoma had to be adjusted to suit market demand and staffing levels were also adjusted to meet production requirement.

Algoma’s current production is at 3.2 million tonnes, but Essar is committed to taking it to four million tonnes.

Essar sources said: “We remain bullish on the long term. We will weather this cycle and emerge favourably poised to capitalise on the market upturn. We maintain a continued emphasis on quality and on-time delivery, actively servicing our current customer base, while seeking new opportunities in Europe and Asia.”

Essar Steel Algoma recently started a new 70 Mw cogeneration facility.

However, unlike the global steel makers, the domestic producers operating in North America can only consider normalising production and are not exploring the possibility of raising prices.

Industry sources said there was a lot of government buying but only the American mills would benefit from it. “If the market absorbs the increase in prices from ArcelorMittal, we will resort to normal production,” said a source.

An ArcelorMittal spokesperson declined to comment.