Message From The Vice Chairman And Managing Director
Theyear2010-11 marks an important milestone in JSW's journey. The year 2010-11 wasfully packed with events like acquisition of Coking coal assets in USA, TechnologicalCollaboration Agreement with equity participation by Japanese Steelmaker JFE and theacquisition of Ispat Industries.
Strategic Collaboration with JFE - The Game Changer
JSW recognizes that the company needs to grow faster than peers in skill, expertise andtechnology. In order to shorten the learning curve JSW entered into Strategiccollaboration with JFE Steel corporation, from Japan to produce high-end value added steelproducts for Automotive and construction Industry, energy reduction technology andenvironmental technology.
This collaboration entails execution of several definitive agreements which areconsistent with your company's long term vision for future growth. The collaborationbetween JSW and JFE involves following:
Ageneral technology assistance agreement, which encompasses all facets of steelmaking and processing from raw material handling to rolling mills including energy controland savings.
A technical assistance agreement encompassing our newly announced cold rollingmill (CRM2).
A foreign collaboration agreement focusing on the manufacture of high-endauto-grade steel presently being imported into India.
The definitive agreement with JFE represents a game-changing milestone in JSWs journeyto emerge as one of the best global steel manufacturing company.
The Company also entered into a subscription agreement with JFE following which theyinvested Rs.4,947 crores in the equity of the Company, holding 14.78% of Equity ShareCapital and Rs. 463 crores towards Global Depository Receipts.
Backward Integration - Strengthening Sustainability
There is a global debate on the importance of increasing downstream productioncapacities or acquiring natural resources. JSW continues to focus on both: the creation ofadditional capacities on the one hand and investing in enhancing resource linkages.
US Coking coal Mines: We acquired coking coal mines in West Virginia, USA. Theacquisition covers seven blocks. We expect to commence production in 2011-12 and ramped upto 3 million tonnes in 3 years.
Chile Iron ore: Our iron ore mines in Chile are ready to supply output tointernational customers. The Bella Vista project is expected to ship 1 million tonne perannum. We have planned to enhance mining in Chile to 3 mtpa over three years.
Changing the dynamics of the Indian Steel Industry - Ispat Acquisition
A new chapter was written in the history of Indian Steel Industry when your companyacquired 45.53% majority stake in Ispat Industries. The new entity that has a capacity of3.3 mtpa and is scalable to 5 mtpa with relatively less investment.
The geographical location of the plant in the west coast of India along with a captivejetty has huge strategic advantages due to proximity to growing western India market andraw material access. With our leading presence in south India we realized that we candevelop healthy synergies with ispat Industries.
Ispat is a company with strong technical fundamentals and cutting edge technology. TheThin Slab casting facility and the compact strip mill give its product a cutting egde inthe competitive market.
JSW will complement these realities with additional investment in coke oven,pelletising plant and power plant, resulting in complete integration that will graduate itto a profitable steel company.
Another Step in Forward Integration - JV for Building Structure
In another landmark event for the steel and construction industries in India , JSWSeverfield Structures [JSSL) , a 50:50 joint venture between JSW Steel and UK basedseverfield Reeve structures, inaugurated its speciality steel plant at Vijaynagar having acapacity of 35000 tonnes per annum on November 17, 2010. The plant will address the fastgrowing needs of the Indian construction market. The output is completely booked for2011-12.
JSW also widened its coverage to cutting-edge flooring technology viz Composite MetalDecking through another joint venture with Structural Metal Decks Limited, UK. Thisprofiled sheeting is used with in-situ concrete and relatively light reinforcement leadingto structurally effective and economic floor solutions. This pioneering technology willreduce concrete volumes by about 30% and overall weight, translating into a pioneeringsolution for high-rise buildings in India.
Growth Strategy- Fine Tuned
As you are aware that we have been pursuing the Strategy of Vertical Integration[Forward and Backward integration) and Horizontal expansion [Growth in Volumes) for thelast few years, we have further fine tuned it in the face of new economic realty in thedeveloped world. We have moved from the erstwhile approach of manufacturing value-addedsteel in the developed economies to manufacturing them in India.
Priorto the meltdown in 2008-09, special steel demand and realizations were robust indeveloped economies, justifying the acguisitions of processing mills in these geographies.However, the prolonged delay in post-meltdown recovery has now made these developedeconomies expensive as processing destinations.
On the other hand, India has rebounded from the global crisis with speed, largely dueto country's consumption-driven economy. These trends are further expected to sustain overthe decade due to increasing disposable income, income distribution, growing urbanizationand rising working population.
In view of the above, the company closed its UK service centre facility, relocated theproduction assets to the company's service centre in India as part of its overarchingstrategy to commission more service centers proximate to steel consuming markets andautomotive hubs in India.
West Bengal Project: We have commenced work on our proposed West Bengal project for thefirst phase for 3.0 million tonnes steel plant and 300 MW captive power plant. We expectto complete the first phase in three years. The work on the boundary wall is on the vergeof completion and soon we will begin the construction of the plant in the next financialyear.
Capacity expansion upto12 million tonnes at Vijaynagar works: The Company has madeassessment of the existing facilities at vijayanagar works and based on findings, we havedecided to increase the capacity by additional 2 mtpa.
Investment in Technology - Towards Lowest Cost Steel producer
We are in the process of implementing a strategy to achieve significant cost reductionby investing in new technologies. We commissioned beneficiation plant at Vijayanagar worksto utilize the low grade iron ore fines. We also commissioned our new sinter plant toenhance the sinter% in the feed which will further increase the productivity of our blastfurnaces and reduce the fuel consumption. In order to further increase the energyefficiency of steel plant we are implementing various project like coke dry guenching.Coal briguetting, waste heat recovery boilers, 100% waste utilization, micro pelletizationetc.
Speed and stability - hand in hand
I take the opportunity to mention that while we move ahead with unprecedented speed,the Company is very stable. We deleveraged our Balance sheet with additional infusion ofeguity and pre-payment of debt. We are financially strong, healthy and stable to pursueour growth plans.
With the world getting increasingly dynamic, turbulence will be the order of the day;volatility will only increase. But I would like to assure shareholders that as a policy,we undertake projects where we continue to be among the lowest cost steel producers in theworld.
Your company is committed to improving the quality of life of all stakeholders throughcontinuous and purposeful engagement in economic progress, social responsibility andenvironmental concern.
I would like to convey my sincere gratitude and appreciation to our shareholders,debenture holders. Customers, Business partners. Vendors, both International and domestic.Bankers, Financial Institutions and all other stake holders for their consistent supportand trust.
A compulsive dreamer, I continue to scan the horizon with optimism and conviction. Thesecond fastest growing economy in the world will take its rightful place as an economicsuperpower. This will create huge opportunities for growth over the next decade. I wouldlike to assure shareholders your company will play an important role in this India growthstory and we will continue to invest in projects, products and markets that reinforce ourposition as one of the lowest cost steel producers in the world leading to a projected 40mtpa capacity by 2020.