Business model and value chain

JSW Group's organisation and management are segment-based and take into account the type of offered goods and the type of manufacturing activity. Efficient mining of high-quality coal is the first stage of production in the business model, closely linked to subsequent stages. Some of the mined coking coal is sold to subsidiary JSW KOKS to produce coke, carbon-related products and coke oven gas. Coal for energy-generation purposes as well as coking coal that is not used by JSW KOKS are sold to external customers.

The second stage is the production of coke using the coking coal extracted from JSW's mines.

The final stage is the sale of JSW Group's products. Each of these stages is additionally driven by a range of technical, market and internal factors.

JSW Group also includes companies that perform support functions, such as IT, research, development and innovations, repair services, security, insurance, training and laboratory services. Keeping in mind new challenges and the resulting need to adapt the Group to a changing environment, the role of subsidiaries is considerably growing from the viewpoint of building JSW Group's value. Impactful relations and interactions between each company and its stakeholders constitute a shared, important element in JSW Group's value chain.

Hard coal mining at JSW takes place at separate organisational units - mines. The coal segment, which consists of five mines, produced 14.8 million tonnes in 2019 (coking coal - 10.2 million tonnes, coal for energy purposes - 4.6 million tonnes). Implementing flagship investments in the mining area will ramp up coking coal production to 85% from 2021 forward, from less than 70% currently. JSW expects to reduce the share of coal for energy purposes in overall output to approx. 12% in 2030, with a coal mining volume of approx. 18 million tonnes. Coal for energy-generation purposes - which is a by-product in the mining of coking coal - is mainly used to generate electricity and heat. Coal for energy purposes is sold to energy companies, industrial users and individual customers. Approx. 95% is sold to power plants and heat-and-power plants.

The mines, which are some of the largest employers in the region, have a workforce of more than 22 000 people, with annual output reaching nearly 15 million tonnes of coal. JSW spends considerable amounts on investments in the mining area in order to make sure that our customers receive coal with proper quality parameters and to develop alternative methods for using this commodity and the products that accompany the production of coal and coke. Approx. 40% of the coking coal produced by JSW Group is processed into coke at the Group's coking plants.

The coal extracted from our mines features low content of ash, moisture, sulphur and phosphorous as well as strong coking ability and plasticity. These parameters mean that the coal is used as the key commodity in producing the highest-quality blast furnace coke, which features low reactivity to CO2 and high mechanical strength.

Coking coal - which features specific quality parameters and profile - is used in the industrial manufacture of coke. JSW Group's mines produce semi-soft (type 34) and hard (type 35) coking coal.

Coke is produced at standalone, non-integrated coking plants owned by JSW KOKS. The coke segment consists of three coking plants, which in 2019 produced 3.2 million tonnes of coke. Coke is produced from type 34 and type 35 coal extracted from JSW's mines. The level and structure of production at each of the coking plants in the coke production area are adapted to market demand. JSW also produces carbon-related products (tar, benzol, sulphur, ammonium sulphate). The Company plans to maintain production at a steady level in the coming years.

Coke, and thus also coking coal, is the key commodity, aside from iron one, in steel-making. JSW KOKS's coking plants produce blast furnace, metallurgical, foundry, industrial and heating coke. The use of a given type of coal mainly depends on the requirements of the technological process in which is it used and on the associated required parameters: gradation, strength, abrasion resistance, ballast content: moisture and ash. Coke, and thus also coking coal, is the key commodity, aside from iron one, in steel-making.

Coke - fuel that is derived in a coking process, which consists of heating up a mixture of special types of coals without access to air at a temperature of around 1000°C. In the coking process, the volatile parts of coal are released in the form of gases, leaving clean coke with high coal content - a high-calorific and slow-burning product.

The steel industry is the largest and crucial customer for coke, where it is mainly used to produce pig iron in a blast furnace process, while finer types are used to produce agglomerates from iron ore that are then used in the production of ferro-alloys. Foundries that use high-quality foundry coke are also in this customer group.

Two delivery options are available:

• road forwarding and transport - coke and carbon-related products - shipments to customers are handled by subsidiaries JSW Logistics sp. z o.o. and BTS sp. z o.o.
• maritime forwarding and transport - shipments to customers are handled by storage sites in ports with the intermediation of subsidiary JSW SHIPPING sp. z o.o.

The Group places emphasis on partnership-, transparency- and market-based negotiations of quantity and price terms, focusing on product quality and responding to each comment or complaint from customers, flexibly responding to changes and withdrawing from planned volumes in the light of unexpected problems or failures at customers' facilities and on ensuring the timeliness of delivery and jointly resolving any logistics problems. Maintaining a trust-based partnership with our customers and counterparties is equally important to us. We protect the privacy of all our customers. In 2019, JSW Group did not identify any complaints related to customer privacy violations or data loss.

Approx. 40% of the coking coal produced by JSW Group is processed at the Group's coking plants into coke, which aside from iron ore is the key element in steel-making. Coal for energy-generation purposes is mainly used to generate electricity and heat. It is sold to energy companies, industrial users and individual customers. Approx. 95% is sold to power plants and heat-and-power plants.