Tata Steel said on Monday the company’s profitability in the current quarter may be hit due to partial suspension of mining operations in Jharkhand and Odisha, and the higher cost on acount of sourcing raw material from outside.
The partial suspension of mining operations has led to “curtailment in production of steel for over a month”, said Tata Steel in a statement.
In a statement to the stock exchanges, Tata Steel said the company’s steel production in Jamshedpur, dependent on captive iron ore mines, were affected in the October-December quarter as mining operations in Noamundi Iron Ore mine in Jharkhand were suspended. Operations at four mines in Odisha, including the Joda iron ore mine, have been under suspension for a month. This has forced the company to curtail production at a blast furnace and operate below capacity for more than a month in the quarter.
“To ensure continuity of its operations, the company had to procure iron ore from domestic and imported sources for Jamshedpur operations despite sever logistics challenges. All these factors have affected the stability of operations, cost structure and profitability of the company in the quarter,” said Tata Steel.
The operations at four mines in Odisha were suspended from November 15 to December 15 as the state government refused to issue despatch notes following the Supreme Court ruling on May 16, 2014.
The mining operations at Jharkhand iron mines have been under suspension since September 4. The company is hopeful of resuming operations soon, as the Ranchi High Court has directed the state government to allow the company to restart mining operations.
The company also said that it is expecting the Odisha government to take a decision on Khondbond iron ore mine and three manganese mines that have been non-operational since May 2014 by the middle of February 2015. It also expects mining operations at Sukinda Chromite mine in Odisha and processing operations of the ferro alloys division to resume soon.
The stock of Tata Steel closed at Rs 404.30, up 1.54% on BSE.