JSW Steel may cut output on iron ore shortage

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.

“Our Toranagal plant presently needs 45,000 metric tonnes of iron ore per day to operate the 7 mtpa. We get 20,000 tonnes per day now. Once we reach the rated capacity of 10 mtpa, we 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,” said Vinod Nowal, chief executive officer and director, JSW Steel.

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.

“We will just keep our furnaces running with whatever ore is available. But, actually, our production may fall below the present capacity of 7 mtpa instead of going up to 10 mtpa,” Nowal said. Presently, the company produces 20,000 metric tonnes of steel per day.

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. “We 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,” he said.

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, he said.

“We have been deferring the commissioning of our new blast furnace for the last two months due to shortage of ore. But, we cannot defer it anymore as it would be uneconomical to keep the plant idle. We have to service the huge debt we have borrowed for our expansion,” he said.

The company’s current debt is in the order of Rs 15,000 crore. Nowal said 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 may drop to as low as 10 mtpa from the present 50 million tonnes. In such case, the steel companies, including JSW will be in deep trouble,” an industry observer said.

With the completion of expansion, JSW is now set to launch high-value products for the automotive sector in addition to its existing products such as cold rolled coils, wire rods, billets among others.