The multi-crore rupees steel industry in Karnataka is witnessing a drastic fall in production due to supply of poor quality iron ore, as a fallout of ban on mining in the state, industry players said.
The industry says that over 22 million tonnes (MT) of iron ore from the stock of 25 MT has already been auctioned and remaining ore has a big presence of alumina, silica and manganese, leading to fall in production as these contents cannot be removed.
“We are running our blast furnaces at 70 per cent capacity. We are hoping to get an immediate relief from the Supreme Court,” JSW Steel’s Joint Managing Director and CFO Seshagiri Rao said.
He added that “availability of quality iron ore is a challenge. Quality is not good as it contains 5-6 per cent mix of alumina, silica, manganese etc. This cannot be removed.”
The production of JSW Steel, which is the largest producer of the metal alloy in the state, has gone down over 24 per cent in February compared to January levels due to inferior quality of iron ore.
Besides, other iron and steel makers in Karnataka that produce about 16 MT of the metal alloy every year, have lowered their production “substantially” due to the lower quality and depleting stocks of iron ore, industry sources said.
They added that the companies are not willing to risk their high investments on plant and machinery due to inferior quality of the iron ore and are keeping their production low although they did not quantify the fall in iron and steel production.
Last year, the Supreme Court had banned mining in Karnataka due to large scale environmental degradation of the areas. Later, it allowed the sale of 25 MT iron ore lying at different mines of the state, through an e-auction.
An official of the Kirloskar Ferrous, which runs a 50,000-tonne unit for grey iron castings in Karnataka, said, “The grade quality of remaining iron ore’s stock is much below the 60 Fe content. We cannot run our plants on that as there are issues like slag formation.”
Expressing similar views, an official of a leading sponge iron manufacturer in the state, said, “Stocks of iron ore has nearly been exhausted and quality of the ore is inferior. Our equipment and machinery would become permanently unusable at the quality. It’s better not to produce.”
Both officials refused to be identified by saying that the matter is sub-judice. The companies are hoping that the apex court would partially lift the ban, following the submission of final report of Central Empowered Committee (CEC) last month.
The CEC, in its final report, had recommended to cap iron ore mining in the state to 30 MT annually and allow mining in the 45 mines cleared of any wrong doing as soon as the ban is lifted.
“Some action point is required. A permission on mining (by the Supreme Court) in clean mines or Category-A mines, as recommended by the CEC, would at least provide us some good quality iron ore to run our plants,” Rao said.
Taking positive cues from overseas markets and pick-up in spot demand, zinc prices rose by 0.24% to Rs 102.80 per kg in futures trade today.