Over 30 sponge iron plants in Karnataka have shut operations due to shortage of iron ore impacting small and medium steel companies such as Kalyani Steel, Sathavahana Ispat and Kirloskar Ferrous.
According to the Karnataka Iron and Steel Manufacturers Association, almost half of the 60 sponge iron plants have shut down and several others have suspended operations partially as mining ban in the state has crippled mining operations and created a shortage of raw material for steel units.
Kalyani Steel MD RK Goyal said, ?It is getting very difficult for us. Only seven or eight mines are operational. It will take at least two years for all the mines to be operational.? Moreover, because of high input costs and non-availability of raw material, some steel producers are forced to underutilise their capacities as they, too, stare at a possible shutdown of their operations in the near future.
Sathavahana Ispat reported a net loss of R44.07 crore in the June 2013 quarter.
According to experts, profitability margins of the steel-sponge iron companies operating out of Karnataka are expected to spiral downwards due to increased procurement costs and lower capacity utilisation due to non-availability of iron ore, which may not even cover the overhead costs fully.
The mining operations in Karnataka resumed recently after a year-long ban imposed by the Supreme Court. In Karnataka, out of the 57 mines approved, only 14 mines are operating with an annual production of 13.77 mt against the total demand of around 35 mt.
Over the last few years, there has been a constant decline in production and exports of iron ore in the country.
The production has come down from 219 mt in the year 2010 to 170 mt in the year 2012 and exports have fallen 117 mt during 2010 to 62 mt in 2012.
The Supreme Court in April allowed resumption of mining activities in 90 mines in Bellary, Tumkur and Chitradurga districts of Karnataka.
A forest bench of Justices Aftab Alam, KS Radhakrishnan and Ranjan Gogoi allowed reopening of 27 ‘A’ category and 63 ‘B’ category mines but cancelled 49 leases of category ‘C’ mines.