JSW Steel may cut output on iron ore shortage

19 Jul 2011 Evaluate

JSW Steel is likely to take production cuts at its 10 million tonne per annum (mtpa) steel plant at Toranagal in Bellary district of Karnataka owing to severe shortage of iron ore, the key raw material to make steel. The company, which completed the expansion of its steel plant from 7 mtpa to 10 mtpa with the commissioning of its 3 mtpa blast furnace, may operate its blast furnace and corex plants at lower capacity. It had invested Rs 14,000 crore on expansion.

The Toranagal plant presently needs 45,000 metric tonnes of iron ore per day to operate the 7 mtpa. While the company get 20,000 tonnes per day now. Once it reach the rated capacity of 10 mtpa, the company will require 67,000 tonnes per day. However, the availability of ore may go down further after the Supreme Court appointed team completes resurvey of the remaining 55 mines. The Supreme Court had ordered suspension of mining in 40 mining leased area in Karnataka, following a recommendation of its central empowered committee (CEC), which is resurveying the mines on allegations of illegal mining.

JSW Steel does not have a captive iron ore mine of its own in Karnataka and sources it from its joint venture with Mysore Minerals Ltd (MML) and other private mine owners in Karnataka and Orissa. The company cannot depend on ore from Orissa for too long since the cost of transportation is high. The railway freight costs work at Rs 2,000 per tonne. The supply from MML joint venture has also come down to 4,000 tonnes per day. The company now buys low-grade iron ore from mines in Chitradurga and Tumkur at Chinese prices

The company’s current debt is in the order of Rs 15,000 crore. The company has been insisting that it be given captive mines as it is the single-largest steel producer in the state. Of the 99 mines in Bellary-Hospet-Sandur region of Karnataka, the Supreme Court has ordered suspension of mining in 40. Another 55 mines will be resurveyed from July 23. If the apex court orders suspension of mining in a few more mines, the production of iron ore industry may drop to as low as 10 mtpa from the present 50 million tonnes.

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