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(Edited Image Courtesy: JSW)
 
President Donald J. Trump’s move to protect & revitalize US steel companies should create realization in Trump Administration about India-US manufacturing bonds. 
The relevance of this issue lies in the fact that Indian steel majors such as JSW and Essar have troubled manufacturing operations in the United States.
On 20th April, Mr Trump signed a Presidential Memorandum prioritizing an investigation initiated by the Secretary of Commerce into whether steel imports threaten to impair the national security. What action he takes would depend on the conclusion of the investigative report that is to be submitted within 270 days. 
This may appear to be long haul for JSW Steel Limited (JSL), whose American plants are operating at abysmally low capacity utilization for the last few years. This has led the company into restructuring its loss-incurring steel business in the United States. 
JSL has intimated foreign investors that it is implementing a reorganization plan. This broadly entails a capital reduction of its Dutch subsidiary, JSW Steel Netherlands B.V and liquidation of step-down subsidiary JSW Steel Holding (USA) Inc. and transfer of the residual assets and liabilities to another US subsidiary, Periama Holding LLC.
JSW Steel Netherlands B.V holds 99.9% stake in JSW Steel Holding (USA) Inc. with the balance o.1% stake held by JSL. The US holding company has 90% stake in step-down subsidiary JSW steel (US) Inc. and 100% in Periama Holdings LLC.
In its $500m debt offer completed on 5th April, JSL stated: “Consequent to the provision for impairment made in the books of accounts in the earlier years amounting to Rs. 62,087.4 million, the Company has taken steps to write off the loans given by the Company to US Hold Co with the ultimate objective of liquidating US Hold Co as well as write-off the Company’s equity and preference capital in the Netherlands Co against the provision made in the books in the earlier years, amounting to Rs. 52,508.8 million.”
The company has clarified that restructuring does not entail any sale of its overseas investments. It continues to have the same economic interests in the Netherland Co., in its operations in U.S. and in Latin America.
It has cautioned investors that “There can be no assurance that the Group’s U.S. operations will reach full production or that they will become profitable in the near future.”
JSW Steel (USA) Inc. has a 1.2 million tonnes per annum (mtpa) plate mill, 0.55 mtpa pipe mill, 0.55 mtpa double joint mill and  0.35 mtpa coating line. This facility is located in Baytown, Texas. It was built in 1971 by United States Steel Corporation to manufacture pipes for the Trans-Alaska Pipeline System and was acquired by JSW group in November 2007.
In May 2010, JSW Steel Holding (USA) Inc. acquired a 100.0 per cent equity interest in Periama Holdings LLC, a West Virginia registered entity, along with permits for coal mining. Periama also owns permits for impoundment and a coal handling and preparation plant and load-out facility. These mines are currently under care and maintenance shut down and the commencement of operations might be further delayed based on prevailing market conditions.
According to JSL’s debt offering circular, “During the year ended 31 March 2016 and the nine months ended 31 December 2016, the performance of the U.S. plate and pipe mill business continued to be adversely impacted by the challenging economic environment in the U.S., resulting in lower capacity utilisation. For fiscal year 2016, 197,408 net tons of plates and 54,262 net tons of pipes were produced from the Group’s U.S. units with capacity utilisation of 21.0 per cent and 9.9 per cent., respectively. For the nine months ended 31 December 2016, 128,938 net tons of plates and 28,432 net tons of pipes were produced from the U.S. units with capacity utilisation of 17.9 per cent and 6.9 per cent., respectively.”
JSW group in its financial statements for the year ended 31 March 2016 has made a provision of: (i) Rs. 6,133.1 million relating to the carrying amount of fixed assets relating to steel operations in the U.S.; (ii) Rs. 6,370.2 million, Rs. 4,074.9 million relating to the carrying amounts of goodwill and mining development and projects respectively relating to iron ore mines at Chile; and (iii) Rs 628.4 million, Rs 789.1 million, Rs 301.2 million relating to the carrying amount of goodwill, mining development and projects, and other related assets respectively relating to coal mines at West Virginia, U.S., which provisions are recognized based on estimate of ‘recoverable amounts’ of the operations or assets by independent external valuers based on the cash flow projections.
 
                                  
 
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