Supply of poor quality iron ore hits steel producers in Karnataka

JSW Steel loses annual revenue of Rs 7,000 crore; Kalyani Steel takes complete shutdown of its plant in the last quarter

Steel manufacturers in Karnataka have been witnessing a sharp rise in cost of operations, owing to the supply of poor quality iron ore.

The supply of low-grade and sub-grade iron ore has also resulted in higher consumption of coke in steel making, as well as affecting the life of their blast furnaces, leading to frequent maintenance shutdowns.

JSW Steel Limited and Kalyani Steels, which operate their plants in Karnataka’s mineral-rich Bellary district, have shut their blast furnaces many times in the past year due to poor quality ore. Their consumption of fuel has gone up by 20 per cent, while slag (a residue that comes out in the process of smelting of metallic ore) output has gone up 42 per cent, thereby causing losses to steel makers.

“We have been witnessing a productivity loss of 20 per cent over the last couple of years due to poor quality ore in our blast furnaces. We have been operating at 80 per cent capacity and the total net loss is Rs 3,000 crore annually,” said Seshagiri Rao, joint managing director and group chief financial officer, JSW. JSW Steel imports coal and converts it into coke before using it in steel manufacturing. The company is incurring an additional cost of Rs 1,500 crore on the import of coal, he said.

DEEP TROUBLE

• Coke consumption up 17 per cent to 630 kg a tonne of steel
• Coke forms 50 per cent of the total raw material cost
• Steel makers are forced to buy low-grade iron ore with less than 60 per cent Fe
• Poor quality ore containing high Alumina resulting in high slag output
• Steel makers also taking frequent maintenance shutdowns due to poor quality ore
• JSW Steel requires 55,000 tonnes iron ore every day. Current availability has declined to 42,000 tonnes

“Overall, we are losing an average Rs 7,000 crore in revenues annually, while the loss to the state and national exchequer is in the order of Rs 1,500 crore in the form of excise duty, value added tax and service tax,” Rao added. JSW Steel operates a 10 million tonne per annum steel plant at Toranagallu in Bellary district. It has two Corex furnaces and four blast furnaces at its plant in Bellary. Annually, the company is losing an average two million tonnes of steel production due to poor quality iron ore.

Currently, iron ore with Fe content of less than 60 per cent is auctioned in Karnataka. As the production of iron ore is yet to be normalised, steel companies are forced to depend on low-grade and sub-grade iron ore. While JSW Steel beneficiates low-grade ore and uses it for steel making, there are many other steel makers like Kalyani Steel that are forced to use low-grade ore or operate at less capacities.

“We require 100,000 tonnes of iron ore every month, but we are getting only 60,000 tonnes of fines with less than 60 per cent Fe. The ore supplied in Karnataka contains very high levels of up to seven per cent Alumina. As a result of this, our consumption of coke has gone up significantly by 17 per cent. Also, the slag output has increased. As we do not have benefication facility, we are forced to use low-grade ore. In the last three-four months, we have undertaken a complete shutdown of our blast furnace to change copper plates, which were burnt completely,” R K Goyal, managing director, Kalyani Steel said. Kalyani’s consumption of coke has increased to 630 kg as against 540 kg when it was getting iron ore with 63 per cent Fe. Now, the company is forced to use iron ore with 60 per cent Fe. Kalyani Steel operates a 700,000 tonne per annum steel plant at Ginigera in Koppal district.

JSW Steel is buying sub-grade iron ore at e-auctions and enriching it at its plant in Toranagallu. “The recovery of steel is hardly 30-40 per cent in sub-grade ore. We have to use 2.5 tonnes of iron ore for making one tonne of steel as against the normal ratio of 1.6 tonnes for every tonne of steel. Also, the alumina content is as high as 15 per cent in this ore, which results in very high output of slag. Overall, our productivity has declined by 20 per cent in Karnataka,” Rao said.