JSW plans Chennai centre, to expand presence in auto steel.

Mumbai: JSW Steel Ltd is planning to set up a processing centre in Chennai, its third such unit in India, as it expands its presence in the competitive value-added steel segment.

“Chennai is in the blueprint. We are looking for land,” Jayant Acharya, director, commercial and marketing, at JSW Steel, said in an interview on Friday.

Processing centres are essentially service units that are closer to factories of clients and help steel companies customize products such as auto body parts, thereby ensuring speedier delivery and low freight costs.

JSW Steel has one of the largest steel capacities in India at 14.3 million tonnes (mt) and is pushing up production of value-added steel, including high grade automotive steel, serviced in a big way through imports.

Last week, JSW Steel said it would set up a processing centre in Pune in a joint venture with Japan’s Marubeni Itochu Steel Inc. in the automobile hub of Pune and invest Rs.204 crore, half and half through equity and debt.

The first phase of the project is expected to come on stream by fiscal 2015 with an installed capacity of 180,000 tonnes per annum that can be scaled up to 360,000 tonnes a year in the second phase, the firm said.

“Anyone who is in auto-grade steel has to have processing centres,” said Chirag Shah, director of research at Barclays Capital, an investment bank. “Obviously, Pune and Chennai are automobile hubs and processing centres will help them to service different geographies.”

Shah said Indian steel makers are seeking to compete with foreign steel makers who service the auto sector, and JSW Steel’s efforts are a step in this direction.

Auto steel is considered to be the most dynamic market where quick innovations are needed to keep pace with new automotive designs as well as the need to have lighter and stronger body parts.

“Other than challenging other domestic steel makers (in auto steel), there is also import substitution that is taking place and that is what JSW is aiming for,” Shah said.

Global rival Posco imports close to 2 mt of steel from its factory in South Korea and has five processing centres in India and a manufacturing unit. It is looking to open at least three more centres, according to company executives who spoke to Mint earlier this year.

India imported 7.9 mt of steel in the fiscal ended March, of which auto-grade steel was about 3 mt, industry data show. The country’s total production of steel was at 77.6 mt, up 2.5% from a year ago, according to the Joint Plant Committee, a research arm of the steel ministry.

In 2011, JSW announced its first Rs.122 crore processing centre in Haryana, also a 50:50 joint venture with Marubeni Itochu, to cater to north India.

Acharya of JSW said the northern India plant is to be set up near Faridabad and it and the Pune plant are likely to be operational next year.

In addition to automobile companies, these centres will be equipped to process flat steel products such as hot-rolled, cold-rolled and coated products for white goods, construction and other value-added segments. JSW Steel produced 8.5 mt of steel in fiscal 2013, of which 6.3 mt was flat products that mainly go into the making of automobiles and consumer durables.

On Friday, shares of JSW Steel rose 1.57% to Rs.774.05. The BSE metals index was up 0.63% to 8,729.94 points, while the benchmark Sensex rose 0.07% to 19,915.95. From October 2012 till date, JSW Steel’s share price have risen 4.19%, while the metals index has declined 17.89%.

Source : livemint.com