A day after announcing 70% cut in Vijaynagar plant production, country?s largest private sector steel maker JSW Steel said that it may completely suspend steel making at the Karnataka plant if iron ore crisis continued in the state.
Company vice-chairman and managing director Sajjan Jindal said that inventory level of iron ore at its Vijaynagar plant had plummeted at an all-time low level forcing JSW to cut production to 3 million tonne annually. ?If the situation continues, we may shut down the entire unit,? Jindal told reporters on the sidelines of an at an Assocham conference.
The company, which runs a 10 million tonne unit in the state, is facing iron ore shortage for the past two months after the Supreme Court banned mining in three Karnataka districts to curb illegal mining.
Though the court had allowed NMDC to e-auction iron ore, the supply is not sufficient for steel makers in the region. The 1 million tonne production allowed by NMDC from its mines in Karnataka is also not sufficient to meet the needs of steel sector in the state.
JSW?s annual iron ore requirement to run its Vijaynagar plant at full capacity is about 16 million tonne. The company is transporting iron ore from states like Orissa to operate 30% of its capacity. But the ore is expensive as the company is paying R1,800 per tonne for transportation.
Jindal said the supply from NMDC has also stooped. ?Nowhere in the world steel industry runs on auctioned iron ore. There has to be a continuous supply. We can not get all the ore from other states because of logistics cost,? he added.
As far as interim measures are concerned, there are none in sight. The mining and steel ministries prefer to maintain a distance as the matter is pending at the Supreme Court.
?We can not do anything. If they (SC) ask for reports or data, we give it to them,? Vijay Kumar, secretary, mining said. Even steel secretary PK Mishra echoed similar views and said that there was nothing that the steel ministry could assure to the private firms with.
The steel ministry, however, is in the process of preparing a report on the state of Karnataka steel producers, which would be given to the Supreme Court.
Jindal said the shut down, if it happens, would also trigger a price hike as demand will be more than production.
?It will definitely have an impact on the prices. We may need to import steel to meet the domestic demand,? he said.
Steel experts felt that low growth demand for steel in the domestic market may not trigger a price rise immediately after a cut in JSW output. The net production of finished steel grew 9.9% during April-August, while the consumption grew only by 1.3%.
Experts said though steel prices are going to firm up, it would be mainly due to increase in the demand.
A few steel consuming industries, however, indicated that they were bracing up for a R1,000-1,500 per tonne increase in steel price next month as imports would not be economical to meet domestic shortages with continued rupee depreciation. The price differential on account of rupee devaluation between Indian and imported benchmark hot rolled coil prices have widened to about R3,700 per tonne.