JSW Steel plans to keep furnaces running

Besides hope on mining resumption, intends to import ore from other states has only 2 months stock for Bellary unit

JSW Steel Ltd, facing severe shortage of iron ore, is trying to work out a contingency plan to ensure steady supply of ore at its Vijayanagar plant in Bellary. The company is currently operating its 11-million tonne (mt) per annum steel plant with inventory of iron ore sufficient for two months. The plan includes importing ore from neighbouring states.

“We have a raw material stock sufficient to run our Toranagallu plant till end of September at 80 per cent capacity utilisation. Though the stockpile reserved for auctions is getting exhausted, we are banking on ore coming from NMDC, which is allowed to mine up to 1 mt per month. It is currently producing about 700,000 tonnes and if they increase production to 1 mt, it would help us,” Vinod Nowal, director and CEO said.

The company has been facing shortage of ore since July- August 2011, when the Supreme Court banned mining in Karnataka and ordered sale of ore only through e-auctions from a stockpile of 25 mt. So far, JSW has purchased 14 mt at the e-auctions and received about 11 mt. It requires 60,000 tonnes of iron ore a day to run its 11-mt plant.

The company is planning to import ore from Chhattisgarh and Odisha to keep its blast furnaces active in the event of further delay in resumption of mining, he said. However, he did not give details of how much the company would import from these states. In case ore stock is exhausted earlier, capacity utilisation will have to be cut.

Nowal, however, is confident that mining will resume in August and supplies would improve. The Supreme Court has permitted opening of category ‘A’ mines already and it is expected to decide on the opening of category ‘B’ mines on August 3.

“We expect at least seven mines to start operations by August. The Central Empowered Committee has approved the reclamation and rehabilitation plans of 11 mines. The Indian Bureau of Mines has inspected four of them and they are now waiting for the Karnataka government to give them the pollution control board’s clearance,” Nowal told Business Standard.

He said these mines can together bring about 3-4 mt of iron ore a year to the market. “It is time for the state government and court to speed up the process of giving clearances, so that they can resume mining immediately,” he said.

Adding: “We will request the apex court to give permission for opening A category mines within 10 days,” Nowal said. While ruling out the possibility of importing ore from abroad for the Bellary plant, as it is located far from a seaport, Nowal said JSW would procure ore from Chhattisgarh and Odisha to keep the plant running. “We cannot close the chimney,” he said.

Meanwhile, the company is also facing the problem of rising prices of iron ore in the domestic market, even as the prices have dropped in the international market. “The landed cost of iron ore purchased at the auctions works out to be at least Rs 800-1,000 more than the international prices, which are ruling at $130 per tonne (Rs 7,280),” he added.